Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair.]

PRIVATE BUSINESS

AUSTRALIA AND NEW ZEALAND BANKING GROUP BILL

Lords Amendments to be considered upon Tuesday next.

Oral Answers to Questions — AGRICULTURE, FISHERIES AND FOOD

Republic of Ireland (Free Trade Agreement)

Lord Hamilton: asked the Minister of Agriculture, Fisheries and Food whether the Government are satisfied with the implementation of the Anglo-Eire Free Trade Agreement in regard to the payment of the Exchequer subsidy to the Eire Government; and if he will make a statement.

The Minister of Agriculture, Fisheries and Food (Mr. Cledwyn Hughes): As the hon. Member is aware, the arrangements for payments in respect of limited quantities of beef and lamb are under consideration with the Government of the Irish Republic as part of the discussions about the trade in cattle and meat. We have, of course, been in touch with the Government of Northern Ireland about this.

Lord Hamilton: Is the Minister aware that the payment of Exchequer subsidy to the dead meat industry in Eire as opposed to the producer undermines and has an adverse effect on the whole structure of the Northern Ireland dead meat industry, which is of vital importance to our agricultural economy in Northern Ireland? Does the realise that if this

anomaly were removed our dead meat industry could expand both production and employment? In fact, it could create 2,400 more jobs.

Mr. Hughes: I am aware of the employment implications in Northern Ireland and of the hon. Gentleman's interest. I am also aware of the difficulty faced by some of the meat plants in Northern Ireland. I have had a series of discussions with the Irish Government about the implications for the trade in cattle and meat, and the Northern Ireland Government are fully associated with those discussions.

Channel Island Milk

Mr. Biffen: asked the Minister of Agriculture, Fisheries and Food if he will take steps to free Channel Island milk from the requirement to be marketed through the Milk Marketing Board.

Mr. Cledwyn Hughes: No, Sir. My right hon. Friend the Secretary of State for Wales and I could intervene in this matter only if it appeared to us that the present arrangements were contrary to the public interest.

Mr. Biffen: Is the Minister aware that many Channel Island milk producers feel that they are certainly disadvantaged by the present distributors' having a somewhat vested interest in promoting homogenised milk as the kind of premium milk to be distributed? Will he bear this very much in mind in whatever future consideration he gives to this kind of question?

Mr. Hughes: I will certainly bear in in mind what the hon. Gentleman said, but it should also be remembered that dairy farmers with Channel Island herds have secured many benefits through the milk marketing scheme, especially assured markets and stable prices, and I doubt whether they would wish to abandon these. I am not sure that it would be right to detach these breeds from other breeds.

Farm Income

Mr. Biffen: asked the Minister of Agriculture, Fisheries and Food what is the estimated percentage of farm income derived from grants and deficiency payments in 1964, 1968 and 1969, respectively; and what is the expected percentage in 1970 on the basis of the recent


price review and assuming normal weather conditions.

The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. John Mackie): Estimates of net farm income are calculated for years beginning 1st June. For the years 1964–65 and 1968–69, the percentages of net farm income derived from grants and deficiency payments are estimated at 50 and 45 respectively. For 1969–70, assuming normal weather conditions and allowing for the effects in April and May, 1970, of the recent price review, the percentage is forecast to remain at 45. No realistic forecast can yet be made for the coming year 1970–71.

Mr. Biffen: As the difference between 50 per cent. and 45 per cent. shows that a rising proportion of farm income is coming from the market rather than from the Exchequer, would not the hon. Gentleman take this as an occasion to welcome that trend and hope that it will continue and thus fulfil Conservative Party objectives?

Mr. Mackie: No, Sir.

Mr. Godber: On the general aspect of Government expenditure in this field, has the Joint Parliamentary Secretary observed the comments in the "Little Neddy" report recently published that as a proportion of public expenditure Government expenditure on agriculture has dropped from 3 per cent. to 1½ per cent.? Does not this chime rather oddly with the Government's declared proposals for expansion of agriculture when the farmers feel that they are not getting enough?

Mr. Mackie: No, Sir. Our support for agriculture, as the right hon. Gentleman knows, depends on the changes in market prices, which affect the deficiency payments, and is also dependent on the levels of net income, which fluctuate with good and bad seasons.

Mr. Peter Mills: asked the Minister of Agriculture, Fisheries and Food why, in appendix II, Aggregate Farming net income in United Kingdom, the actual income of £526½ million is higher than the raised sample of £418 million.

Mr. Mackie: The actual aggregate net income for 1968–69 is estimated at £480½ million. The difference between this and

the raised sample estimate is explained in note (iv) of Appendix II.

Mr. Mills: Many of us are seriously concerned about these differences. Does not the hon. Gentleman agree that a far more accurate picture is needed, that all the reports from private investigations show that the situation is far worse than the Ministry believes? In the interests of agriculture, will the hon. Gentleman see that a far more accurate picture is given?

Mr. Mackie: If it is figures about which the hon. Gentleman is anxious, I suggest that he studies these figures carefully.

Mr. Mills: I have done so.

Mr. Mackie: The hon. Gentleman says that he has done so, but his Question is wrong. He gives the figure of £526½ million, but, in fact, it is £480½ million. If he wants to talk about accuracy, he should read the figures carefully tonight in bed and then argue about the matter.

Mr. Bryant Godman Irvine: asked the Minister of Agriculture, Fisheries and Food if the new raising method of calculating the aggregate farming net income includes the effect of devaluation and of inflation.

Mr. Cledwyn Hughes: The raised estimates of aggregate farming net income are based on some 3,600 farm accounts, which record farmers' actual costs, from whatever cause these arise.

Mr. Godman Irvine: Is the Minister therefore satisfied that these costs leave the farmer in 1968–69 with precisely the income which he had in 1964–65?

Mr. Hughes: The hon. Gentleman must be aware that the annual income of the industry has increased and is shared among fewer farmers.

Mr. Ashton: Did not devaluation raise prices of imported food by about 14 per cent. and is not an increase in the price of imported food a main plank in Conservative Party policy? Did not the farmers gain in competitiveness by devaluation?

Mr. Hughes: There were, of course, advantages in devaluation, and these have been made known to the House on several occasions.

White Fish Authority (Advertising Levy)

Mr. McNamara: asked the Minister of Agriculture, Fisheries and Food whether he will now make a statement on the collection of the White Fish Authority advertising levy.

The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. James Hoy): The White Fish Authority Publicity Scheme Confirmatory Order 1970 came into operation on 5th April last. It provides for payment to the authority within seven days after the end of the week in which levy is incurred, but, subject to that, the arrangements for collection are the responsibility of the authority itself.

Mr. McNamara: I thank my right hon. Friend for that reply. Is he aware that now that the Order has been confirmed most hon. Members will hope that all merchants will forget their foolishness about not paying the levy? Is he satisfied that if some persist the White Fish Authority will take the necessary steps?

Mr. Hoy: I am grateful for what my hon. Friend has said. He was expressing the opinion of hon. Members on both sides when the Order was laid. The action can follow if payments are not made.

Food Prices

Sir G. Nabarro: asked the Minister of Agriculture, Fisheries and Food by how much the price of all food sold by retail in Great Britain during the 15 months ended 31st March, 1970, or the latest convenient period, increased in aggregate, expressed in £ sterling, and what part of such increase, in £ sterling and ad valorem, he attributes to higher review commodity prices to British farmers in the period stated.

Mr. Cledwyn Hughes: Between 1968 and 1969 household expenditure on food in the United Kingdom increased by nearly £315 million. This was partly attributable to increased prices and partly to increased population, changes in the level of purchases and changes in quality. No figures are available which would enable me to estimate what part of this increase is attributable to higher prices for review commodities.

Sir G. Nabarro: Has not the right hon. Gentleman perceived that in recent months the retail price of food has been rising faster than ever before and, measured over 12 months, pro rata, is now rising at a rate three times as great as the Chancellor's tax reliefs yesterday? As Minister of Agriculture, Fisheries and Food, what will he do about this rip-roaring inflation in food prices?

Mr. Hughes: The hon. Member must not use exaggerated language of that kind.

Sir G. Nabarro: It is not exaggerated.

Mr. Hughes: There is no rip-roaring inflation, as the hon. Member suggests. I agree that there have been increases but, on the whole, through our early warning system and constant watch system we have maintained food prices at a relatively stable level. Principal causes of the increase have been the higher costs of raw materials and wages. The important thing to bear in mind is that whereas expenditure on food increased by 5·5 per cent. last year, earnings increased by 8·6 per cent.

Mr. Ashton: Has my right hon. Friend any figures showing what the effect would be if food subsidies were abolished, as the Tory Party, after the Selsdon Park conference, indicated would be its policy?

Mr. Hughes: We are aware that there would then be a substantial increase over and above the normal increase.

Mr. Godber: Does the Minister consider that the normal increase, as he calls it, that has arisen under his Government would continue under a Conservative Government? Of course it would not. Does he admit that the increased cost of food over the last 12 months to the last available date is over 7 per cent.? If he does not call that rip-roaring inflation, what figure does he need before he calls it that?

Mr. Hughes: The increase last year was 5·5 per cent. As for the first part of the question, the right hon. Gentleman's confidence in his party's policy is far greater than that of the country at large.

Sir G. Nabarro: On a point of order, Mr. Speaker. In view of that very unsatisfactory reply, I beg to give notice that I shall raise this matter on the Adjournment.

Mr. Kenneth Lewis: asked the Minister of Agriculture, Fisheries and Food what were the main increases in food prices during 1969 and to date in 1970.

Mr. Hoy: The most significant food price increases during 1969 were in meat, potatoes, other fresh vegetables, milk, fish and bread. So far in 1970 the most significant increases have been in tomatoes, bread, potatoes, and other fresh vegetables.

Mr. Lewis: Does the hon. Gentleman realise that as the housewife's food bill goes up, so the farmers' income seems to come down? Is this not a clear indication of the need for a system providing increased farm incomes and support?

Mr. Hoy: The hon. Gentleman had better make up his mind which way he wants to go. The complaint is always that the producers are not getting enough for the goods. These are the things which have gone up, together with the wages of those employed.

Import Substitution

Sir G. Nabarro: asked the Minister of Agriculture, Fisheries and Food what further steps he is now taking in consultation with the statistical department of the Board of Trade to establish the value of agricultural contributions to imports' substitution policies, including horticulture; and whether he will now place facts and figures in this connection, monthly, in the Library of the House, or publish in other concise and convenient form.

Mr. Mackie: None, Sir; to collect, analyse and publish this information monthly would not be justified.

Sir G. Nabarro: In view of the persistent procrastination and evasiveness of the Minister in this matter, can he say how Members of the House of Commons and the wider public outside are to gauge the efficacy or otherwise of the right hon. Gentleman's continuous boast that agriculture and horticulture are making a contribution to the import substitution policy, whereas they are evidently making none?

Mr. Mackie: I do not agree with the hon. Member's first premise. The long-

term indications show what is happening in agricultural production, and to take monthly figures would be quite ridiculous.

Beef Stabilisation Scheme

Mr. Jopling: asked the Minister of Agriculture, Fisheries and Food what progress he is making with his beef stabilisation scheme; and whether he will make a statement.

Mr. Hoy: Bilateral discussions with the Governments of our main suppliers of beef are still proceeding. We are not yet in a position to report their outcome.

Mr. Jopling: Does the Minister agree that the Government's proposals for the beef stabilisation scheme involve a levy on imported beef? Does he further agree that no one has ever imposed a levy on imports that did not put up the price of food? Will he not agree that the Government's proposals for levies on imports will also put up the price of food?

Mr. Hoy: We are attempting to stabilise the price of food, and of meat in particular. I recall that in a previous Question Hour the hon. Member demanded that prices be increased.

Farming Costs

Mr. Jopling: asked the Minister of Agriculture, Fisheries and Food what steps he is taking to slow down the escalation in farming costs which has occurred in recent years.

Mr. Buchanan-Smith: asked the Minister of Agriculture, Fisheries and Food what measures he now proposes to contain the present high rate of increase in costs to the agriculture industry.

Mr. Cledwyn Hughes: The 1970 Annual Review determinations more than covered increased costs over the past year.

Mr. Jopling: Does the right hon. Gentleman agree that under his Government costs have been rising at about two-and-a-half times the rate compared with a similar period under the previous Government? Is it not scandalous that the Government have been going round during their Price Review trying to blackmail organisations such as feeding-stuff manufacturers to stabilise their prices for a period? Does he realise that the Government are the villains of the piece, and


that they should be putting their own house in order before they try to get other people to absorb the rising costs?

Mr. Hughes: As I have said before, costs were high last year, but to accuse the Government, or me, of trying to blackmail feeding-stuff manufacturers is scandalous, and I must ask the hon. Member to withdraw his remarks.

Mr. Buchanan-Smith: Does not the Minister realise that, apart from the Price Review, the agriculture industry is still in the grip of a roaring cost inflation? Does he know about health insurance stamps, telephone charges and machinery costs, all of which have risen since the Price Review?

Mr. Hughes: I said that I agreed that cost increases were high, but they were not the highest ever. There were years during the administration of the party opposite when costs were very high. I would point out that one of the main items in the global total of cost increases last year—no less than one-third—was the wage award to agricultural workers. Many farmers employ no labour, and they have been unaffected by this increase. It is also important to remember that the number of farm workers fell from 544,200 in 1964 to 402,200 in 1969. All those factors must be taken into account.

Mr. Speaker: I remind hon. Members that long Questions and Answers mean fewer Questions and Answers.

Mr. McNamara: Can my right hon. Friend explain a dilemma to me? We have had appeals for price stabilisation from the party opposite and, having achieved stabilisation of certain prices, we are bitterly attacked for it. We were attacked for our prices and incomes policy, under which we tried to fix prices and incomes. Now the party opposite attacks free collective bargaining, which to a certain extent puts prices up.

Mr. Hughes: My hon. Friend is right in what he says.

Mr. Godber: May I remind the Minister of what the late Tom Williams—as he then was—said in the House in 1957, when speaking of a Conservative Price Review, when costs had risen far more than the average rise under a Conservative Government—in fact, by £38 million? He said that increased costs

were the most serious thing which could capsize the best-run ship. Will the Minister take note of the fact that under him costs are rising at least twice as fast?

Mr. Hughes: I am always conscious of the cost factor in relation to the Price Review, but I am bound to point out to the right hon. Member and his hon. Friends that the record of this Government is much better than that of the Opposition. The fact is that we have had two cost-plus Reviews in six years, as against their one in 13 years.

Mr. Jopling: On a point of order, Mr. Speaker. I beg to give notice that, far from withdrawing what I said, I shall raise this matter on the Adjournment at the earliest moment.

Mr. Speaker: Notice must be given in the conventional way.

Codes of Practice (Hewer Committee Report)

Mr. Turton: asked the Minister of Agriculture, Fisheries and Food whether he has yet received from the Hewer Committee the report on the points of disagreement with the codes of practice expressed in the debate on 20th October, 1969; and whether he will publish the report.

Mr. Mackie: My right hon. Friend the Minister and my right hon. Friend the Secretary of State for Scotland hope to receive this report in May. When the report has been received consideration will be given to its publication.

Mr. Turton: Is the Minister aware that there is widespread concern about the inadequacy of certain of these codes of practice? Does he remember that on 20th October last year a Division was avoided because his right hon. Friend gave a definite assurance that he would speedily place this report before the House? Will the Minister give us an assurance today that his right hon. Friend's assurance will be implemented speedily and fully?

Mr. Mackie: I explained to the right hon. Gentleman some time ago, in answer to a question, that this is a complicated matter. We know how seriously people feel about it. I shall convey the point made by the right hon. Gentleman to


my right hon. Friends, but the right hon. Gentleman, as an ex-Minister, knows that a report to a Minister is not always published. This is an advisory report to the Ministers.

Farm Buildings (Areas of Outstanding Natural Beauty)

Mr. Peter M. Jackson: asked the Minister of Agriculture, Fisheries and Food whether he will consider providing additional financial assistance for the construction of farm buildings where such buildings are subject to stringent planning requirements, as in national parks and areas of outstanding natural beauty.

Mr. Mackie: If a building is being erected with grant-aid we will pay grant on any extra costs imposed by planning requirements provided these are not unreasonably high compared with the agricultural benefit to be derived from the building. In most cases we are able to pay grant on the total cost, but this is as far as we can go.

Mr. Jackson: I accept the terms of that reply. However, will my hon. Friend endorse the views of my right hon. Friend the Member for Rossendale (Mr. Greenwood), in the admirable publication "Farm Buildings and the Countryside", that large farm buildings increasingly dominate our small-scale landscapes? Is he aware that grant or aid is only 25 per cent. and will he consider increasing it in areas of outstanding natural beauty and national parks? In particular, will he consider the reluctance of farmers to meet the additional costs of painting buildings, which I understand may be as high as £200?

Mr. Speaker: Supplementary questions are not Adjournment debates.

Mr. Mackie: My right hon. Friend also pointed out that there was no reason why a silo should not be as beautiful as a windmill. However, I will take note of what my hon. Friend has said about this difficult subject.

Sir Harmar Nicholls: One part of the hon. Member's answer was somewhat ambiguous. He said that the Ministry would pay the extra cost if the figure was reasonable. If planning considerations mean that it must be an expensive building, should not that be covered by the grant?

Mr. Mackie: Up to now we have paid grant on every occasion when this matter has arisen. There has not been an occasion when we have considered it unreasonable.

Fertiliser and Lime Subsidies

Mr. Buchanan-Smith: asked the Minister of Agriculture, Fisheries and Food what is his estimate of the extent to which his proposals to increase fertiliser and lime subsidies will improve in 1970 the resources of farmers who bought their fertilisers and lime before 18th March, 1970; and if he will make a statement.

Mr. Mackie: With a pattern of deliveries similar to the previous year, the improvement on deliveries in 1970 would be £5–6 million. This represents the extra subsidy on about three-quarters of the fertilisers and six-sevenths of the lime estimated to be delivered in 1970.
Over a whole twelve months, the improvement would be about £10 million.

Mr. Buchanan-Smith: Will not the Parliamentary Secretary look at this the other way round? Did not one-quarter of the farmers order their fertilisers before March, so that they will not benefit from the proposals in the Price Review? Is not this again a tax on prudence which the Government are imposing?

Mr. Mackie: If I may say so, the hon. Member does not often talk nonsense, but he is talking nonsense now. [HoN. MEMBERS: "Answer the question."] I am about to answer the question. The hon. Member knows perfectly well, as I demonstrated it to him in a chart during a debate late one night recently, that deliveries of fertiliser have been practically the same in every year, so much being ordered before 18th March and so much afterwards. Those who had their fertiliser before 18th March this year will get the increased subsidy next year provided that they are in the same position next year.

Balance of Payments

Mr. Bryant Godman Irvine: asked the Minister of Agriculture, Fisheries and Food if he will undertake a survey designed to provide the information on which a complete assessment may be based of the contribution agriculture could make to the balance of payments.

Mr. Cledwyn Hughes: The E.D.C. for Agriculture made a valuable and comprehensive assessment of the technical possibilities of import saving in its report of 1968, and I see no need for a further survey.

Mr. Godman Irvine: It is a considerable time ago that the Select Committee on Agriculture explained that it was impossible to make an adequate forecast of the way in which agriculture could be helped in this way without more research. When will the right hon. Gentleman set that in motion?

Mr. Hughes: The Ministry itself is engaged in research and the E.D.C. for Agriculture is also constantly studying the matter, issuing reports from time to time. Remembering also the work done by the universities, it can be said that agriculture is being studied continuously.

Mr. Stodart: Is not the right hon. Gentleman embarrassed or, preferably, ashamed at coming to the House after the report of the "Little Neddy", having recently allowed, despite all he said about import saving, the import of 20,000 more tons of butter and allowing the share to the home producers of the sheep market to drop catastrophically to 33 per cent.?

Mr. Hughes: The hon. Gentleman is guilty of a number of inaccuracies in one supplementary question. We study the reports of the "Little Neddy" for agriculture carefully and we think that they are valuable. The hon. Gentleman must remember that its recently published report was compiled well before the Annual Review, so that it did not have at its disposal the most up-to-date figures.

Horticulture (Costs)

Mr. Blaker: asked the Minister of Agriculture, Fisheries and Food what estimate he has made of the percentage increase in costs of horticultural growers over the last 12 months; and if he will make a statement.

Mr. Hoy: As the reply contains a number of figures, I will, with permission, circulate the information in the OFFICIAL REPORT.

Mr. Blaker: Is the Minister aware that the latest report of the "Little

Neddy" makes the point that confidence remains crucial for the future of horticulture? When costs are soaring but the prices which growers are receiving for their produce are static, how can confidence be what it should be?

Mr. Hoy: It is true that certain costs have gone up, but it is just as true that some major costs—oil, fuel and fertilisers—have come down. I hope that we all want an absolutely efficient industry, and I remind the hon. Gentleman of the special assistance which the industry receives from the horticultural improvement scheme.

Mr. Newens: Have not the Government done far more to assist horticulture than did the previous Government? Were there not many more complaints in the Lea Valley at the end of the Conservative Administration than there now are?

Mr. Hoy: What my hon. Friend has said is correct. Anyone who cares to look at the matter impartially will see that the present Government have given considerable help to horticulture with grants running at 38⅓ per cent., as a consequence of which tremendous building is taking place, especially of glass houses, which are of such importance to the industry.

Following is the information:

Cost changes for agriculture and horticulture together were estimated for the Annual Review. The approximate percentage changes for the main expenses of horticulture were:—


Item of Expense
Approximate per cent. change over last 12 months


Increases


Wages and Insurance
+6½


Petrol
+2½


Machinery Prices
+4


Rent
+10


Seeds
+3


Transport Charges
+10


Packaging materials
+6 to 12


Building materials
+7


Glasshouses
+5


Solid fuel
+13


Decreases


Oil fuel
-3


Fertilisers
-1½

The effect of these changes would vary considerably according to the type of production of the individual grower.

Mr. Stodart: asked the Minister of Agriculture, Fisheries and Food what


additional costs have fallen upon horticultural producers in 1969–70; and what their share of the recent Price Review awards will be.

Mr. Hoy: About £10 million of the total cost change on all products as estimated for the recent Annual Review may be attributed to horticulture. Prices of horticultural crops are not guaranteed but growers will benefit from the increases in the subsidies on fertilisers and lime and in the grants for field drainage and water supply.

Mr. Stodart: Does this not make absolute nonsense of the Government's express desire to save imports of things that could be grown at home? Is the right hon. Gentleman not making this quite impossible by inflicting these additional costs? Has he taken any account yet of the way in which the Transport Act will bite into horticulture?

Mr. Hoy: I cannot understand the hon. Gentleman. He exaggerates when he talks in such a way. I do not dispute that there have been increasing costs, just as in two cases I gave earlier there have been decreases in costs. I would remind him again that the rate of grant under the horticultural improvement scheme is 38½ per cent. He ought to agree that this is fairly substantial progress and assistance given to the industry which has never been given before.

Sir Harmar Nicholls: Is the right hon. Gentleman aware that he has given, in answer to horticultural questions, some optimistic and complacent answers and that he has then gone on to say he cannot confirm figures? Is he aware that this industry feels that it is being thrown to the wolves? Does he appreciate that in the Vale of Evesham and other horticultural areas income is less than it has been for a number of years?

Mr. Hoy: I do not agree with a single word uttered by the hon. Gentleman. As a result of these substantial grants, the industry is fairly sound. I did not say, and I do not want the hon. Gentleman to impute that I said, that I was complacent. I am never complacent. This is a first-class industry and with the assistance that we give it, it can build itself up. The worst thing that could happen is that an attempt should be made to knock it down.

Mr. William Hamilton: Would my right hon. Friend say whether grants are given to those growers who refuse to submit accounts? Can he say what proportion of the growers refuse to submit accounts, and why they do so?

Mr. Hoy: We do not have power to compel the growers to send in accounts. We meet the industry regularly and make assessments as far as possible, but we have no power to cancel grants because the growers will not supply information.

Mr. Godber: Is the right hon. Gentleman aware that the impression in this House is one of complacency, whether he likes it or not? Is he aware that this industry feels that it is being neglected? It cannot have the benefits of the Price Review like others. Does he realise that for him to take all the credit for the horticultural improvement scheme is somewhat unfair since we introduced it? The present Government may have extended it, but does he agree that that can help only with capital grant and not with income?

Mr. Hoy: The right hon. Gentleman is making a mistake. There has been a very big increase in grants in the industry. There is an increasing acreage. These two things mean that progress is being made. The right hon. Gentleman must not say that I am complacent about this. I spend a considerable time dealing with this section of the industry, and I am willing to stand by the results.

Tomato and Lettuce Growers, Lancashire (Income)

Mr. Blaker: asked the Minister of Agriculture, Fisheries and Food if he will make a statement about the net income of growers of tomatoes and lettuce in Lancashire in 1969.

Mr. Hoy: My right hon. Friend has no information on which he could base a statement about the net income of growers of tomatoes and lettuce in Lancashire in 1969.

Mr. Blaker: Is it not a fact that Lancashire is the biggest tomato and lettuce growing county in the country? Is the right hon. Gentleman aware that the local horticultural division of the National Farmers Union estimates that a substantial increase in returns will be necessary to avoid a decline in this industry?

Mr. Hoy: Yes, we have this information. Over the country as a whole the price for tomatoes and lettuces was somewhat lower in 1969, compared with 1968, but still higher than in 1967. The reason why I cannot give the information for which the hon. Gentleman asks is that many growers are not willing to disclose their accounts and we do not want to compel them.

Mr. Scott-Hopkins: Would the Minister agree that costs of these growers have increased to a much greater extent than those of their competitors?

Mr. Hoy: As the hon. Gentleman knows, and as I have just said, we do not have proper accounts. I do not know whether he is asking me to take powers to compel the growers to give these.

Milk Producers' Prices (Northern Ireland)

Lord Hamilton: asked the Minister of Agriculture, Fisheries and Food what is the disparity between milk producers' prices in Northern Ireland and Great Britain.

Mr. Hoy: It is estimated that the net average price received by wholesale producers in Northern Ireland in the year ending 31st March, 1970, was 4·9d. per gallon less than in England and Wales and about 6·2d. per gallon less than in the main Scottish marketing area.

Lord Hamilton: I trust that the Minister will agree that this is a very serious situation? Would he agree that this is due partly to the low allocation of the standard quantity for milk in Northern Ireland?

Mr. Hoy: The present scheme is much the same as that introduced by the hon. Member's right hon. Friends in 1954. As to the standard quantity, the Northern Ireland standard quantity is already generous. In 1969–70 it included all liquid sales plus reserves of 142 per cent. The corresponding reserve was 63 per cent. in Scotland and only 25 per cent. in England and Wales. So Northern Ireland does not do too badly.

Cattle and Sheep (Quarantine Regulations)

Sir Richard Glyn: asked the Minister of Agriculture, Fisheries and Food if

he will now bring in quarantine regulations against rabies for cattle and sheep, and especially for those coming from North-West Europe.

Mr. Mackie: No. Cattle and sheep, although possible victims, are not carriers of this disease.

Sir Richard Glyn: Is the hon. Gentleman aware that imports of substantial numbers of cattle from Northern Europe are expected and that published figures show that the incidence of rabies in recent years in these areas has been nearly four times as great among cattle as among dogs and cats? Will he at least warn the importers of those dangers?

Mr. Mackie: These animals can be victims but they are not carriers, and there is no greater case for the imposition of a rabies quarantine on domestic livestock than there is for requiring the isolation of human beings coming from places where rabies is prevalent. Sometimes I would like to take powers to isolate certain people.

Agricultural Output

Mr. Stodart: asked the Minister of Agriculture, Fisheries and Food what the annual rate of increase of agricultural output has been in the last six years; and how this compares with the expansion proposed by the Government in the National Plan.

Mr. Cledwyn Hughes: In the six years to 1969–70, the annual average rate of increase in agricultural net output was 2·2 per cent. per annum. No precise figure for increased net output was set for the expansion proposed under the National Plan.

Mr. Stodart: Was there not a very clearly implied increase in the National Plan of 3 per cent.? Was not 3 per cent. per annum the rate of increase of the last few years under a Conservative Administration, and in view of the complete and utter fiasco of the Government's expansion programme, will the right hon. Gentleman tell us why he continues to sit where he does?

Mr. Hughes: The hon. Gentleman is getting uncharacteristically melodramatic.


It is true that a figure of 3·5 per cent. per annum was given in the National Plan for agriculture, forestry and fishing. But that figure was based on the industry's own assessment of the technical possibilities for increasing output over the Plan period. On the second part of the hon. Gentleman's dramatic question, the present Government were the first to provide broad expansion objectives over a period of years. That is more than the Conservatives did when in office. Then some increased output was achieved in spite of restrictive policies, such as setting standard quantities, which we have abolished.

Estimated number of self-employed* in agriculture
Number of Regular Whole-time Workers in Agriculture at June


United Kingdom
United Kingdom
Cornwall







Males
Females
Males
Females


1951
…
…
…
419,000
621,700
70,000
10,647
975


1964
…
…
…
360,000
380,700
33,600
6,481
426


1969
…
…
…
333,000
281,100
26,900
4,857
329


* Based on the figures in the Population Censuses, for persons describing their occupations as one classifiable to agriculture. These estimates may include some working part-time. Estimates for Cornwall only are not available.


† Returned in the Agricultural Censuses. Since these include all persons working on the holding except the farmer and his wife they include family workers and junior partners, some of whom are self-employed. Hence there is some overlap with the numbers of employers and self-employed, though the extent of this is not known

Mr. Pardoe: asked the Minister of Agriculture, Fisheries and Food what was the number of farm businesses in the United Kingdom and in Cornwall, respectively, in 1951, 1964 and the latest year for which figures are available.

Mr. Mackie: For the years in question, the number of holdings as shown in the Agricultural Census were, for the United Kingdom, 536,000, 445,000 and 357,000; and for Cornwall, 14,000, 12,000 and 10,000. The numbers of farm businesses cannot be estimated precisely, but are somewhat less.
Since 1964, some 50,000 holdings in England and Wales, of which 1,700 were in Cornwall, have been excluded from the Census.

Mr. Pardoe: I am grateful to the hon. Gentleman for that reply. Does he expect the present rate of decrease in holdings to continue? Can he make some projections for us today?

Mr. Mackie: That is a very difficult question. As the hon. Gentleman knows, we have an amalgamation scheme. We do not see why there should be a decrease

Farm Business

Mr. Pardoe: asked the Minister of Agriculture, Fisheries and Food how many men and how many women were employed or self-employed full time in farm businesses in the United Kingdom and in Cornwall, respectively, in 1951, 1964, and the latest year for which figures are available.

Mr. Mackie: As the reply contains a number of figures, I will, with permission, circulate the available information in the OFFICIAL REPORT.

Following is the available information:

in the speed of amalgamations and in the decline in the number of holdings. We presume that they will continue as at present, but it is very difficult to project very far forward.

Cheddar Cheese (Imports)

Mr. Wingfield Digby: asked the Minister of Agriculture, Fisheries and Food what reduction in imports of Cheddar and Cheddar-type cheese will result from his new agreement with importers, compared with actual imports in the year April, 1969, to April, 1970.

Mr. Cledwyn Hughes: Import figures for the year ending April, 1970, are not yet available. The restraint arrangements which I announced on 25th March will ensure that imports of Cheddar and Cheddar-type cheese during the coming year will be about 3,000 tons less than the average of the tonnages agreed for the previous two years.

Mr. Digby: Is the Minister aware of the serious increase in the trend of imported cheese? Why is it necessary next year to continue to increase imports by


nearly 5,000 tons of Cheddar cheese from France?

Mr. Hughes: The hon. Member must admit that we are controlling the importation of cheese in a way that has never been done before. This has stabilised stocks in this country. My announcement of 25th March gave new benefits to the British dairy industry by ensuring another year of restraint on imports and continuing market stability. Unquestionably, we have made very good progress in this complex and difficult matter, and I wish that the hon. Member would give credit for it.

Iceland (Fishing Trade Relations)

Mr. Hector Hughes: asked the Minister of Agriculture, Fisheries and Food if he will make a statement on the visit of the Joint Parliamentary Secretary to Iceland from 8th to 13th April in connection with the European Free Trade Fisheries Group, indicating the subjects discussed and decisions made, relating to fishing trade relations, with Iceland and the benefits which will result to Aberdeen fisheries from these discussions.

Mr. Hoy: This was a goodwill visit at the invitation of the Icelandic Minister of Fisheries to see something of Iceland and the Icelandic fishing industry. There were no discussions of the kind envisaged by my hon. and learned Friend.

Mr. Hughes: When visiting that great fishing nation, did the Minister take advantage of the occasion to enlist its aid in stopping poaching in North Sea fishing grounds, which is a real menace to the Aberdeen fishing industry?

Mr. Hoy: Obviously, in the course of my visit matters appertaining to fishing were discussed in a friendly way, but we did not go into any real proposals. However, I would point out to my hon. and learned Friend that one striking thing to be seen in the British Embassy in Reykjavik was a very large bill advertising a fair to be held in his constituency next month.

Mr. Buchanan-Smith: Did the right hon. Gentleman have any discussions about drift netting for salmon in the waters around Iceland? Can anything be done to help the salmon fishing industry in this country in this respect?

Mr. Hoy: That is a problem common to both countries, and we exchanged views on it. As the hon. Gentleman knows, we are trying to arrange a conference with all the countries concerned. It was Great Britain which took the initiative in trying to find a solution to this problem.

Domestic Insecticide Aerosols (Labelling)

Mrs. Joyce Butler: asked the Minister of Agriculture, Fisheries and Food if he will introduce regulations requiring more informative labelling of domestic insecticide aerosols similar to those required for farm and garden insecticides under the Farm and Garden Chemicals Act.

Mr. Hoy: The Advisory Committee on Pesticides and Other Toxic Chemicals recommended in December, 1969, that pesticides for domestic uses should be subject to mandatory labelling requirements. My right hon. Friend is considering legislation to implement this and other recommendations with his right hon. Friends.

Mrs. Butler: But in view of the very liberal and often hit-and-miss way in which domestic aerosols are used, particularly near food, could my right hon. Friend indicate when we may expect this legislation, because it is a matter of some urgency that safety precautions and active ingredients should be shown on the containers?

Mr. Hoy: We hope to introduce the legislation as quickly as possible, but, obviously, we must take into consultation other Departments and interests. There is no evidence that domestic insecticide aerosols present a special hazard, and they are generally safer than other types of insecticide pack. But, obviously, all these matters will have to be taken into account before introducing legislation.

Mr. Scott-Hopkins: When drafting the regulations, would the right hon. Gentleman take care not to include too much information on the label? At the moment a great many labels have much too much information on them, with the result that nothing on them is read. Will he ensure that only important information, such as the danger of toxicity, is included?

Mr. Hoy: I shall take every precaution I can. Occasionally I get into trouble in the House. If I do as the hon. Gentleman suggests, I am told that there is too little information on the label. On other occasions I am told that there is too much. Sometimes I am criticised because the size of print is too large or too small. I shall exercise the best care I can.

Telephone Charges

Mr. Kitson: asked the Minister of Agriculture, Fisheries and Food what will be the cost to the agricultural industry on the increase in telephone charges over the next 12 months.

Mr. Mackie: The total cost to agriculture in a full year is estimated at about £½ million on all products, and about £¼ million on guaranteed products.

Mr. Kitson: Can the Parliamentary Secretary say how long it will be before increased costs wipe out any surplus which farmers may have received in the last Price Review?

Mr. Mackie: No. As the hon. Member well knows, it is very difficult to project forward what costs will be. As he also knows, however, these costs are considered at the Price Review the following year.

Oral Answers to Questions — HOUSE OF COMMONS

Members' Postal Facilities

Mr. William Hamilton: asked the Lord President of the Council if he is now satisfied with the operation of the free postal facilities provided for hon. Members; and whether he will consider limiting the number of pre-paid envelopes to a fixed figure per week for each Member.

The Lord President of the Council and Leader of the House of Commons (Mr. Fred Peart): I am sure this facility has been of service to Members in dealing with their Parliamentary correspondence. I will continue to keep a close watch on its use, but I hope any limitation such as that suggested by my hon. Friend will not prove necessary.

Mr. Hamilton: Is my right hon. Friend aware that a letter, obviously a circular letter, has come into my possession sent

out by a former Chairman of the Tory Party, the right hon. Member for Taunton (Mr. du Cann)? Obviously, 4,000 or more have been sent out at the taxpayers' expense. Is that the kind of facility which my right hon. Friend had in mind when he introduced the system?

Mr. Peart: I assure my hon. Friend that there had been no misuse of the facility by Members before the Services Committee came to a decision about how to interpret the concession as regards letters to new voters. However, I believe that use of the facility for this purpose was becoming excessive. For that reason, I raised the matter with my colleagues on the Services Committe and issued my instruction.

Sir A. V. Harvey: On a point of order, Mr. Speaker. The hon. Member for Fife, West (Mr. William Hamilton) has made a serious charge against my right hon. Friend the Member for Taunton (Mt. du Cann). It is an old-established custom of the House that the hon. Member concerned is given notice when it is proposed to make such a charge. May I ask whether my right hon. Friend the Member for Taunton was given notice?

Mr. Hamilton: Further to that point of order, Mr. Speaker. I gave the right hon. Member for Taunton such sufficient notice that he sent me a reply in which he said "Personally, I think it is fatuous to impose a limitation on free postage." Therefore, the right hon. Gentleman has had the opportunity of being informed on the Question.

Several Hon. Members: rose—

Mr. Speaker: Order. It is courteous to give notice when an hon. Gentleman intends to refer to another Member. Apparently that has been done.

Sir Harmar Nicholls: On a point of order, Mr. Speaker. The hon. Member for Fife, West (Mr. William Hamilton) referred to the letter as a circular. In the interests of Members, may I ask whether it was a parliamentary circular or an outside circular? It is a drastic imputation if it is suggested that it was not parliamentary. It has been suggested that the Minister for Posts and Telecommunications sent similar letters to his constituents. Was it the same circular or a different one? We should know that.

Mr. Speaker: That is not a point of order; it is a point of argument.

Sir G. Nabarre: Would the Leader of the House bear in mind, if any further consideration is given to this matter, the extraordinary inequality numerically in the size of constituencies? For example, the hon. Member for Birmingham, Lady-wood (Mr. Lawler) has only one-fifth of the number of constituents of other Members, who may have up to 100,000 electors in their constituencies. Therefore, would it not be grossly inequitable to put a limit on the number of official-paid letters which may be sent?

Mr. Peart: I thought that I said that. I agree with the hon. Gentleman.

New Members (Introduction)

Mr. Marten: asked the Lord President of the Council if he will refer to the Select Committee on Procedure the proposal that new Members desiring to take their seats shall be introduced immediately following Questions.

Mr. Peart: The Committee's terms of reference already allow it to consider the hon. Gentleman's suggestion. He will recall the answer which I gave to him on this matter on 21st October, 1968.—[Vol. 770, c. 879.] I have not since been aware of any general desire in the House for this change.

Mr. Marten: There would not be a general desire if the matter had been referred to the Select Committee and we were awaiting the result! Is it not time that the House began to debate general fairly small points like this and the right of Privy Councillors to speak first in debates?

Mr. Peart: A general debate on matters affecting the House is another matter, and I will consider it sympathetically. I cannot make any promise about a debate. I am pressed for time.

Select Committee on Defence

Mr. Ridsdale: asked the Lord President of the Council if he will make a statement on the Government's present policy regarding the appointment of a Select Committee on Defence.

Mr. Peart: I have nothing to add to the reply I gave to my right hon. and

learned Friend the Member for Ipswich (Sir Dingle Foot) on 24th March, 1970.

Mr. Ridsdale: But if the right hon. Gentleman is not willing to move towards the idea of setting up a Select Committee on Defence, which is supported in a Motion signed by over 100 Members, would he arrange for a debate? Does he not realise that the existence of one Defence Staff and not three emphasises the necessity of having some other means of cross-examining Service chiefs?

Mr. Peart: I am aware of the Motion, which I have seen. I have already informed the House that the Government will be publishing their proposals on specialist Select Committees very soon—some time this spring. I hope that then the House will have an opportunity to debate the matter, when no doubt this point will be raised.

Mr. John Mendelson: Would my right hon. Friend bear in mind that there is a body of opinion in the House which is opposed to the setting up of more specialist Select Committees? Will he frame his proposals with these views in mind as well as other views submitted to him?

Mr. Peart: I am aware of another point of view, that Parliament should focus all its attention on the Floor of the House rather than in specialist Committees. That view must be considered.

Television Annunciators

Mr. Marten: asked the Lord President of the Council why the times shown on the closed circuit television annunciators are shown in both British and Continental fashion.

Mr. Peart: The annunciator shows the actual time by means of a digital clock, and all standard digital clocks show the time in Continental fashion. The indication of the time when a speech or proceeding began continues to be indicated in British style. This is designed to assist hon. Members in differentiating between the two times, but if hon. Members find it confusing, I should certainly be willing to re-examine the matter.

Mr. Marten: As we are not, and never will be, part of continental Europe, may I welcome the right hon. Gentleman's desire to reconsider this matter and urge


him not to be led astray by the precedent of British Railways, because we are the British Parliament and for goodness sake let us have British time showing in the British Parliament?

Mr. Peart: I have given my reply. Let me leave it at that for the moment.

Photocopying Service

Mr. Roebuck: asked the Lord President of the Council if he is aware of the inconvenience to hon. Members resulting from closure of the photocopying room in the House at 10 p.m.; and whether he will arrange for a photocopying machine to be available at all times.

Mr. Peart: There is available for the use of Members a photocopying machine in the Library and on the Clerk of the House Floor, both of which can be used at any time up to the rising of the House. If the photocopying room were kept open after 10 p.m. it would entail recruitment of an additional attendant.

Mr. Roebuck: Can my right hon. Friend make that clear? Most hon. Members are under the impression that the photocopying machine in the Library can be used only for reproducing Library material. Indeed, is not my right hon. Friend aware that there is a notice to that effect. Furthermore, many hon. Members work here until late at night, and we have far too few facilities. Surely it is not beyond the realms of his great administrative ability to arrange for the photocopying room to remain open all night.

Mr. Peart: I am pressurised about expense. There are two machines, and I have given an answer about them. I will look into the matter about the Library.

Mr. James Davidson: At what time are these machines available in the morning? I and, I believe, many other hon. Members would be more concerned to see the machine operating before 10 o'clock in the morning, particularly as there is often only half an hour between the opening-up of the machines and the starting of Committees.

Mr. Peart: I will look into that.

Reports (Debates)

Dame Irene Ward: asked the Lord President of the Council how many reports issued over the last five years by Departments have not yet been brought before the House for debate; and whether he will list them.

Mr. Peart: I am afraid that this information is not available.

Dame Irene Ward: Am I to understand that a register has not been kept of the various types of report to which I have referred? If that is so, does not the right hon. Gentleman think that it is very bad administration? Does he regard it as fair to ask committees, often composed of very competent, hard-working people, to take an immense amount of time studying problems which are referred to them by the Government if we then never debate them and the Government do not even have the courtesy—and probably the Opposition did not either—to keep a list of the subjects which have been gone into by these important, hard-worked bodies so that we, the House of Commons, should know what laxity there is in debating reports?

Mr. Peart: I do not know about laxity. There are many reports—for example the report of the Ministry of Technology on the structure and behaviour of laminar separation bubbles in September, 1969, or the Meteorological Office monthly weather reports. I do not want to waste the time of the House on these matters or to have more civil servants collecting useless information.

Mr. Maudling: The right hon. Gentleman has explained why the information required is complicated. He has not explained why it is not available.

Mr. Peart: It is not available because we have no personnel collecting statistics on this.

Oral Answers to Questions — SCOTLAND

Grant-Aided Schools

Mr. Edward M. Taylor: asked the Secretary of State for Scotland if he will make a statement of his policy regarding the grant-aided schools in Scotland.

The Secretary of State for Scotland (Mr. William Ross): The Report of the


Scottish Committee of the Public Schools Commisison was published on 24th March. The report is under consideration and I am not yet ready to make a statement.

Mr. Taylor: Would the Secretary of State agree that his policy of reducing the grant element in the total costs of these schools is causing real hardship to the parents of the children concerned? Is it his policy that there should be freedom of choice in education only for the rich?

Mr. Ross: The answer to both questions is, "No".

Mr. Dewar: Will my right hon. Friend acept that there are many people in Scotland who welcome the logic of the report and would be glad if the present anomalous situation was resolved by inviting these 29 schools either to cooperate fully with the local authorities in establishing comprehensive education or, at least, to accept the full financial implications of the independence which in many ways they are presently allowed to enjoy?

Mr. Ross: It is a valuable report. It is a matter now for public discussion and consideration of what should be done about it, and in due course the Government will make their views known. I am aware that there are many people who hold the views which my hon. Friend has expressed.

Mr. Gordon Campbell: Will the Secretary of State undertake not to proceed with any action in this matter until the General Election has shown which policies the electorate wish to be carried out?

Mr. Ross: No. We will carry on doing our duty.

Part-time Education

Mr. Edward M. Taylor: asked the Secretary of State for Scotland how many children in Scottish schools were receiving part-time education at the most recent date for which figures are available; and what percentage of this total was in the Glasgow area.

Mr. Ross: I would refer the hon. Gentleman to the answers I gave to the hon. Member for Perth and East Perth-

shire (Mr. MacArthur) on 22nd January and 10th February.—[Vol. 794, c. 190–1; Vol. 795, c. 317.]

Mr. Taylor: Is the Secretary of State aware that the answer to which he refers showed that the numbers of children receiving part-time education had more than doubled during the last 18 months? Is not this a critical situation? Will the Secretary of State take urgent steps to ascertain the present position?

Mr. Ross: I do not want to go back to local authorities every month to ask for this information. Knowing the interest of the hon. Member and of the Government in this matter, I have asked local education authorities to make a regular return of numbers of pupils on part-time education in January, May and September of each year.

Mr. Hugh D. Brown: While I appreciate my right hon. Friend's reply and recognise that almost double the number of young people are coming out of training colleges this year compared with the last year when the Opposition were in office, will he nevertheless recognise that there is still a serious, acute shortage of primary teachers in certain areas? In the current salary negotiations, will he at least consider increasing the special inducement from £100 to £200 for secondary teachers?

Mr. Ross: My hon. Friend will be aware that that last point is already on the cards. The Glasgow position is mainly one concerning primary teachers which, I think, will be more ready and earlier of solution. The numbers entering for the primary teaching qualification increased from 2,049 in 1964–65 to 3,213 this session. In places like Renfrewshire and Lanarkshire the problem is more seriously a secondary one, and we are examining ways of stepping up recruitment and deploying teachers more satisfactorily.

Turnhouse Airport (Facilities)

Mr. William Hamilton: asked the Secretary of State for Scotland what recent representations he has received from interested organisations on the need for improvements in the facilities at Turnhouse Airport, Edinburgh, in time for the Commonwealth Games; and what replies he has sent.

Mr. Ross: None, Sir.

Mr. Hamilton: If my right hon. Friend takes an interest in this matter, as he obviously must, will he specify what improvements, if any, will be made and completed at this airport before the commencement of the Commonwealth Games?

Mr. Ross: I think my hon. Friend knows my interest in this, both as a Minister and as a user. My main responsibility is for the longer-term development of the airport. I have been in close touch with my right hon. Friend on this. On details this is a matter for the President of the Board of Trade.

Sir J. Gilmour: Will the right hon. Gentleman deny the rumour circulating in Edinburgh that the runway is to be closed for strengthening during the course of the Commonwealth Games?

Mr. Ross: The hon. Gentleman should pay his own jovial attention to rumours of this sort and dismiss them when they are nonsense.

Mr. Stodart: Is the right hon. Gentleman aware that the state of Turnhouse falls far below the hopes expressed for it at this time by his right hon. Friend the Chancellor of the Exchequer when he received a deputation on this subject in 1965? Can he think of any other country in the world whose Government would tolerate the conditions at Turn-house before an event like the Commonwealth Games?

Mr. Ross: The hon. Gentleman should not exaggerate. My right hon. Friend will take into account what has been said today.

BILL PRESENTED

OFFICIAL SECRETS ACT 1911 (AMENDMENT)

Dame Irene Ward presented a Bill to amend the Official Secrets Act, 1911 in such a way as to bring it into line with the practice of modern publicity and communications: And the same was read the First time; and ordered to be read a Second time upon Friday, 26th June and to be printed. [Bill 143.]

Orders of the Day — WAYS AND MEANS

Order read for resuming adjourned debate on Question [14th April].

AMENDMENT OF THE LAW

That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance, so, however, that this Resolution shall not extend to making—

(1) amendments of the enactments relating to purchase tax so as to give relief from tax, other than amendments making the same provision for chargeable goods of whatever description, or for all goods to which any of the several rates of tax at present applies;
(2) amendments of the enactments relating to selective employment tax so as to give relief from tax—

(a) by way of exemption from, or a reduction in the rate of, tax except in respect of all persons of the same descriptions relevant for determining the rate of the employer's flat-rate contribution with which the tax is combined, whether that contribution is under the National Insurance Acts or under the corresponding enactments in Northern Ireland; or
(b) by way of providing for payments to employers of an amount equal to the whole or a specified part of the tax paid if the proposed provision—

(i) is in respect of employers in, or at establishments in, part only of Great Britain; or
(ii) extends to employers in. or at establishments in, Northern Ireland; or
(iii) is in respect of all persons in any particular description of employment in all parts of Great Britain, and relief in respect of the whole of the tax paid could be given in respect of that description of employment by an order under section 9(1)(a) of the Selective Employment Payments Act 1966 adding that description of employment to the employments to which section 1 or 2 of that Act applies; or


(c) by adding or removing any employer to or from the employers to whom section 3 of that Act applies, or
(d) by amending the provisions of Schedule 1 or Schedule 2 to that Act;


(3) amendments of the provisions of the Customs (Import Deposits) Act 1968 so as to give relief from the import deposits required by those provisions to be paid, other than amendments making the same provision for all goods on which such deposits are so required to be paid;
(4) provisions relating to betterment levy.

Question again proposed.

BUDGET RESOLUTIONS AND ECONOMIC SITUATION

3.32 p.m.

Mr. lain Macleod: The Chancellor of the Exchequer yesterday received some congratulations which he well deserved for the manner of his speech, and I gladly add my tribute to them. It was particularly easy to listen to and a good deal more agreeable than his previous Budgets, in that the taxpayer, for once, did considerably better out of it.
In one respect, which I will come to, the right hon. Gentleman's philosophy was less coherent than I normally find it and, on the biggest issue of all, which unquestionably is the inflation facing the country, he showed a lack of courage in the House, although he redeemed it to some extent with his television broadcast in the evening.
When my right hon. Friend the Leader of the Opposition christened this Budget "a one-month Budget" he made a point that is worth spending a moment or two to develop. The total personal disposable income in this country is slightly over £30,000 million. Thus, 1 per cent. on prices represents approximately £300 million off spending. It is in such terms that Budgets are normally considered. Price increases over the six months to February, 1970, totalled 3⅓ per cent., that is to say, they cut purchasing power by over £1,000 million.
Breaking it down, in December, 1969, purchasing power was cut by £210 million—about the same as the Budget—in January, 1970, by £250 million, and in February, 1970, by £160 million. I guess that when we get the price index for next week the figures will be substantially higher still. The description, therefore, of this Budget as "a one-month Budget" which wipes out the price increases of a single month, is entirely accurate.
There was some irritation that my right hon. Friend said that this was the first Budget since—[Interruption.]

Mr. Speaker: Order. The Chancellor of the Exchequer was listened to yesterday. The House is a fair place and must listen to the Shadow Chancellor.

Mr. Macleod: There was some irritation yesterday that my right hon. Friend said that this was the first Budget since

1949 in which a Socialist Chancellor of the Exchequer had reduced taxation. The new voters aged between 18 and 21 were not born the last time a Socialist Chancellor of the Exchequer came to the Dispatch Box to reduce taxation.
It is important, first, to set down the whole record of the Chancellor of the Exchequer and his predecessor. In his three Budgets, the Chancellor of the Exchequer has taken from the people £1,513 million, less the £200 million of yesterday—a total so far of minus £1,313 million. His predecessor, now the Home Secretary, took in his various Budgets over £1,000 million.
We can see how far away we are from the promise given by the Prime Minister just before he became Prime Minister in September, 1964:
Over the period of a Parliament I believe we can carry it out"—
Labour's programme—
certainly without any general increase in taxation.
The Government are about £3,100 million adrift from that promise.
I turn to the Budget judgment. The war this year for Jenkins's ear was sternly fought, particularly in part by the Tribune group. They must have been disappointed at his judgment that the expected 3 per cent, assuming no change, could reasonably only be moved up to 3½ per cent. I find Budget judgments increasingly unreal. It is true, as the Chancellor of the Exchequer has claimed, that he has given more information than any previous Chancellor. Even so, some of the major factors, for example, the speed with which higher wages will be cancelled out in real terms by rising prices, can make a difference of hundreds of millions of £s to the Budget judgment.
I thought yesterday that the Chancellor of the Exchequer was particularly anxious to isolate everything unpleasant from his Budget, but we should count in at the same time the £65 million for higher telephone charges and the £40 million for higher National Health Service contributions which we shall be invited to introduce tomorrow.
In the same way as the Chancellor of the Exchequer did, I turn, first, to the background and then to a study of his proposals. I hope to be a little less selective than he was yesterday.
I start with the balance of payments. The change in our affairs has been remarkable and is wholly welcome. There are one or two qualifications that it is right to make, and, indeed, the Chancellor of the Exchequer made them, but they do not detract from the welcome that I give to the position. Those qualifications are that the inflow of long-term capital last year is unusual and unlikely to last; that we were favoured with a particularly strong increase in world trade, a 17 per cent. rise in world trade in manufactures; and that the very small rise in the volume of imports owed a great deal to the near stagnation of our economy, with the G.D.P. growing at 1·8 per cent. All the same, the turn-round is remarkable and welcome.
The Chancellor noted the unusual trend in relation to visible trade. We did not, it is true, achieve a visible surplus in 1969, but we have been running a visible surplus for some months and we are doing it at present. The Chancellor also noted yesterday how unusual this was, for, as he said, visible surpluses have been earned in only two years since 1822. It was no doubt the urgent need for brevity in the right hon. Gentleman's speech that led him to omit to mention that the two years since 1822 in which a visible surplus was earned were 1956 and 1958.
We have a strong currency, but at what a price? First, unemployment. There was scarcely a mention of this in the Chancellor's speech, yet the position is as Peter Jay's article of 20th March pointed out:
Unemployment is now unmistakably rising. The true level is already at a postwar high.
That is, the true level today is higher than in any of the more artificial peaks, such as 1963, or the figure which was double even the 1963 one, for similar climatic reasons, 1947.
It is worth putting the record as it stands now clearly before the House. Every time one mentions the present figures of unemployment one is apt to be met by the retort—a fair debating retort, provided one knows the background—that for a month or two in 1963 the figures were higher still. As I have said, for a month or two in 1947 they were must higher than that.
But the reality is that in neither of those years was either the run-up or run-

down particularly heavy. For example, in 1962 the December figure was less than that for December, 1967, December, 1968, or December, 1969. It was the addition of 250,000 unemployed, in the event only for a few weeks, to the January figure that gave validity, such as it is, to this particular debating point.
I wish to put the figures for the highest unemployment level in Great Britain since the war for each month, in summary form, for the first four months of the year—two of those months being occupied by the Conservatives, in 1963, and two by the Socialists, in 1947, both unreal for the reasons I have explained.
In May, the record is held equally by the Conservatives and Socialists and, after that—that is, after the heavy seasonal Influences had been brought to bear—this is the picture: June, 1968, Labour; July, 1968, Labour; August, 1969, Labour; September, 1969, Labour; October, 1969, Labour; November, 1967, Labour; and December, 1967, Labour. There can be no doubt at all, looking at those figures, that Peter Jay's comment is right; that the unemployment position as we have it now, and as we have had it for 32 months, is worse than at any time since the war.
Moreover, the pattern of the regions is not at all encouraging. I do not believe that there is any way round this figure for people who seek to argue that higher levels of unemployment pay have taken the sting out of unemployment. For example, I do not see how that explains the fact—these details are taken from HANSARD—that 62·6 per cent. of the people unemployed in March had been out of work for over eight weeks, nor why, in the Northern Region—as a Written Answer on 29th January showed·27 per cent. of the men unemployed in that region last October had been out of work for more than a year.
It was an extraordinary omission or the Chancellor to pass so lightly over a matter that traditionally has concerned the House very much. I hope that a Government spokesman will deal with this point and, in the light of the Budget forecast how the Government think unemployment might run, bearing those figures in mind.
There is no doubt, as I said in my opening remarks, that the biggest issue lies


outside the Budget. It is the worst cost-push inflation since 1951 which we are facing today. The House will remember that a year ago the whole emphasis of the Budget was on the abandonment of much compulsory legislation in the prices and incomes sphere and the bringing forward into the limelight of the reform of trade union legislation.
We had the Prime Minister, the Chancellor of the Exchequer and the First Secretary, who spoke in last year's debate following me on the first full day, sallying out against the massed ranks of the T.U.C. until they were called back from the brink by the fathers of the Labour Party, including the right hon. Member for Sowerby (Mr. Houghton). I am indebted to my hon. Friend the Member for Horsham (Mr. Hordern) for pointing out the similarity, at least in words, between this squalid surrender and the rather more heroic occasion in ancient Rome:
And straight against that great array Forth went the dauntless Three… 'Come back, come back Horatius!' Loud cried the Fathers all. 'Back Lartius! back, Herminius! Back, ere the ruin falls!'

Mr. Andrew Faulds: Very well done.

Mr. John Mendelson: Reading!

Mr. Macleod: I suppose that the victors are entitled to cheer.
The White Paper on Productivity, Prices and Incomes shows clearly what has happened between what was promised or foreshadowed and the events of recent months. In Cmnd. 4237 we were told:
most wage and salary settlements need to fall in the range of 2½ per cent. to 4½ per cent. increase in a year if this aim of greater price stability is to be achieved.
We know what has happened to price stability. I see from a Labour Party poster—this poster is called "No. 24"; it makes one wonder what the first 23 were like—
Labour Government's Achievement: Prices and Incomes Watched to Protect us from Inflation
That is what we have been reduced to.

Mr. Alfred Morris: On 9th October, at Brighton, the right hon. Gentleman said that a draft proposal from Professor Wheatcroft for a value-added tax would

be available at the turn of the year. May I remind him that the year turned almost four months ago? As he is fond of using the phrase "come clean", I challenge the right hon. Gentleman to "come clean" and publish the draft proposal for a Conservative value-added tax and, at the same time, tell us by how much it would increase the cost of living.

Mr. Macleod: I do not mind diverging for a moment on that subject. What I said was that this would be used, and it has been used, for the consultations on value-added which have taken place.
But, in reply to the hon. Gentleman's point, it is quite wrong to suggest whether value-added adds or does not add to the cost of living until one knows the rates which are being put forward. After all, value-added is a tax which has been adopted not just by the six Common Market countries, but by three Scandinavian countries as well. It may be that the hon. Gentleman has read the report of the N.E.D.C. on this matter. If so, he will have seen there the very favourable comments made about the tax by Mr. Catherwood and others, with which I agree.
I said that I was dealing with debt and with savings. On the question of debt, the Chancellor had much news to give us yesterday. I welcomed particularly his undertaking, as I understood it, that in future the returns will be made in the ordinary way, quarterly, in the Bank of England Bulletin. That is a welcome return to normality.
However, for a moment we should not just look at the burden of our short and medium-term debts, which are formidable, but see what has happened, also to our long-term debts. At the date of agreement, these totalled £1,475 million. The total repayments, mainly in Conservative years, totalled £473 million. One would expect, therefore, that we owed about £1,000 million. On the contrary. we owe £1,793 million, £318 million more than when the debts were first contracted. The reason for it is the two devaluations put forward by Labour Governments, one under Mr. Attlee and one under the present Prime Minister.
Secondly, we should realise what an enormous burden high interest rates make to the payments that we have to meet. This used to be a favourite point of the Prime Minister's when he led for the


then Opposition. In Cmnd 4234, we are told that servicing debt will cost £2,050 million. That is an increase of £1,000 million since 1959–60, although the debt has increased in sum only by a quarter. That means that approximately £700 million of this increase is attributed to rising interest rates.
It lends particular irony to the most common promise made by hon. Members opposite on both front and back benches before they formed an Administration in 1964 which, from their election addresses, one can see was concerned with lower interest rates. In his election address the Chancellor of the Exchequer said:
…mortgages well within the range of the ordinary wage earner. That is why Labour will reduce interest rates.
The First Secretary of State said:
I promise to help tenants and owner-occupiers through cheaper housing loans—and have I ever let you down?
Well, yes.
There is one notable exception. In winding up the Budget debate a year ago, the Paymaster-General, then Financial Secretary to the Treasury, was saying that the increase in interest rates was inescapably linked with rates in other countries. I intervened to ask him why
…the most convincing promises were given by almost every hon. Member opposite in their election addresses in 1964, particularly by the Prime Minister, that they would bring the rates down?
The right hon. Gentleman's answer was:
Everybody in high office from Canute downwards and of both parties has been persuaded that in certain circumstances his words can have more effect than follows inevitably… I cannot recall off-hand any specific pledge by any specific Member of the House on either side with predictions on interest rates."—[OFFICIAL REPORT, 16th April, 1969; Vol. 781, c. 1271.]
I thought how wise and true it was of the Paymaster-General to be the one single exception from this promise. But, reading that statement yesterday, I thought that I would send for his election address in 1964. He said:
Both rents and mortgage interest will be kept down by the steps a Labour Government would take to ensure favourable interest rates.
I turn to my last point on the background. It is one to which I attach great importance, although I will be brief about it. It concerns savings. I thought that the Chancellor of the Exchequer was somewhat too complacent yesterday in

his references to savings. The truth is that the total sum invested in national savings fell by almost £130 million. If we exclude net accrued interest, they fell by a remarkable £266 million.
If we look at the figures over three substantial periods of government, they show a pattern. Between 1946 and 1951, the average annual increase per head of savings was minus 19·9 per cent. Between 1951 and 1964, it was plus 17·4 per cent. Over the five years or thereabouts that we have had since, it was plus half of 1 per cent. That leads to the inescapable conclusion that, for whatever reasons, people simply do not save, and have not saved in the past, under Socialist Governments.
There is only one point that I wish to put to the Chancellor in that connection, and it is one that I hope we will pursue at the appropriate time. The right hon. Gentleman knows that I am broadly in support of the S.A.Y.E. scheme. We intend to table an appropriate Clause to introduce an equity element. Perhaps the right hon. Gentleman is aware of the work of the Wider Share Ownership Council. I have studied this, and I believe that the S.A.Y.E. scheme will be given a considerable boost if such an equity element could be introduced.
So much for the background. I turn now to the Budget proposals. In recent years, we have voted against various tax increases and, if necessary, we would continue to do so. Equally, we have no intention of voting against tax reductions—

Mr. Faulds: Surprise, surprise!

Mr. Macleod: One does not shoot even a one-legged Santa Claus. I thought that it would simply be convenient for the House to know that I do not intend to invite it to vote on Monday evening.
There are a large number of small proposals, and I therefore deal with them very briefly in welcome, though my welcome is just as sincere in spite of the brevity of what I say. I welcome very much what has been done for the old, and for some of the fatherless families, which I think is in advance of the Morris Finer Committee on the one-parent family, which will report in due course.
I also welcome the changes in surtax, the sensible tidying-up of stamp duty, and the exemption of live theatre production from selective employment tax.


But there are so many demarcation problems in S.E.T. that I wonder whether the Chancellor is really wise, for the trifling saving there must be, in trying to draw what seems to me a rather artificial distinction between production and management in the live theatre. He might be wise to take that into account in the consultations he will have.
I turn now to the main proposal, which is complex. I think that few realise how much of the net amount returned to the people goes to those above the cut-off point. My calculations are that about £88 million, or half the amount the Chancellor thought he could spare for this proposal, goes to those with incomes above the cut-off point, including those who get an additional surtax benefit. There is no doubt that the balance used to lift the threshold levels will be useful to very many people. But there is, as my right hon. Friend the Leader of the Opposition has said, a very strange disincentive to working overtime, in that after the proposal in implemented tax will automatically start at 32 per cent.
That seems to be a move exactly against the way we want to see those graphs move.

Mr. W. Howie: Could the right hon. Gentleman tell me how many people who work overtime were taxed at the reduced rate?

Mr. Macleod: This is beyond me, and I would guess that it is beyond Her Majesty's Ministers as well.
I turn to what I regard as the main omission from the Budget—any relief directly aimed at child poverty. The Chancellor has no doubt seen the Child Poverty Action Group, and so have I. I do not wish to go into the controversy that perhaps the group has with the Labour Party. Its case is that on the whole the poor have got poorer since 1964. This is denied by the Government, and I do not take sides on that, but the point I think is valid is that in one sense it was intended, because it is implicit in devaluation, that people's living standards should be lowered.
As the present Home Secretary very wisely said on 24th July, 1967, when he was Chancellor:

Let there be no dodging about this. Those who advocate devaluation are calling for a reduction in the wage levels and the real wage standards of every member of the working class of this country."—[OFFICIAL REPORT, 24th July, 1967; Vol. 751, c. 99–100.]
That is absolutely true, but if as a result the poor have got poorer, and if, although no great sums of money can be given away at least the two-year slog is over, I really do believe that poverty in the home should be about the very first claimant on whatever money the Chancellor may have available.
Let me look at the size of the problem. There are still about 250,000 children living in poverty, if we define that as an income below the scales of requirement for supplementary benefit purposes. One method of helping them is an increase in family allowances. The long-term answer, if there be one, is probably a form of negative income tax, or a device of that nature. I am certain that the Government have studied this. We have given a great deal of study to it, but we have not yet found a wholly satisfactory method of automatic identification, which would be its great advantage, of those below a given line.
It may be that for the future a negative income tax, or something like it, is the right answer and could be an automatic answer to some of the problems of child poverty, but in the meantime, although it quite likely is not a very popular thing to do, I think that if we operate in this matter we should do so on the family allowances with the claw-back. The cost of a 10s. increase with claw-back would be £30 million net. It is, of course, much more gross. This is a very strong claimant indeed upon the amount of money the Chancellor thought was available.
I do not normally respond to the invitations I sometimes get from some hon. Members opposite to produce alternative proposals, because I believe it to be, in general, an unreal question. But this time, if we assume that the Chancellor has about £170 million, instead of his enormously complicated scheme, and instead of ignoring—though that is too strong a word, because some of his proposals, of course, help to deal with poverty—the claims of those who do not benefit from reductions in taxation, he would have been wiser to help on the lines I have indicated to the tune of about


£30 million; to have taken 3d. off the income tax, at a cost of £90 million, which would have brought it to 40 per cent.; and to have used the remaining amount of £55 million in allowances
That would have been more readily understood, and I believe that it would have been a fairer distribution of the amount of money the Chancellor had available.

Mr. James Dickens: No.

Mr. Macleod: I shall try to listen to the hon. Gentleman's speech if he will let me get on.
I would have thought that the right hon. Gentleman would agree that there is a case in the matter of child poverty, even if he may differ from the solution I have put before the House.
There is no question that the main election point in the Budget will be that the Chancellor has taken 2 million taxpayers out of taxation. But perhaps we should look a little more closely at that. A year ago he claimed that 1 million people were coming out of taxation. We now have the figures provided by the Financial Secretary to the Treasury, and, far from 1 million coming out, 1,060,000 more paid taxation. It therefore follows that 1 million were floated back in by inflation, together with another million. It is precisely the same 2 million that we are dealing with again this year, the same 2 million who were affected by the proposals of the Chancellor last year.
Yesterday, the Chancellor drew a favourable contrast on the balance of payments, not between the last five years of Socialist and Tory Administrations but between calendar years that suited him best. I made no complaint against that—so long as I may fill in the other key economic indicators. For the record, comparing the years 1960–64, the last five Tory years against 1965–69 on the other principal economic indicators these are the figures: growth in the Tory years plus 3·8 per cent. annual average, Labour average plus 2·2; unemployment, average monthly figure, 423·6 per cent. under the Tories, 474·3 per cent. Under the

Socialists; industrial production increase 23 per cent. under the Tories, 13 per cent. under the Socialists; annual average increase in savings, at constant prices, 14·7 per cent. under Tories, 0·5 per cent. under the Socialists.
Average annual increase in prices, 2·6 per cent. in the Tory years, 4·1 per cent. in the Labour years; net incurred overseas debt, minus £360 million in the Tory years, plus £1,650 million in the Socialist years; amount added to tax rates, minus £500 million during the Tory years, plus £3,100 million in the Labour years. Lastly, and this sums it up, the average family man, with a wife and two children had a standard of living, at 1969 prices, during the Tory years which was better by plus 33s. and, during the Labour years, by plus 11s. 9d.
Every one of these comparisons represents a breach of faith by the Government, and especially by the Prime Minister. Anyone who has studied the Prime Minister's undertakings, from the grammar schools, which were not to be abolished except over his dead body, no extra unemployment, no extra taxation, Rhodesia, up to the final undertaking on housing, "not a lightly given promise but a pledge," anyone who has studied the whole range of undertakings must have evolved what we might call "Wilson's Law", which states a great truth in simple terms: the more definite the promise, the more certain the breach. Or, as Emerson put it a century ago:
The louder he talked of his honour, the faster we counted our spoons.
A year ago the strategy of the Government was based on trade union legislation. Now thy are defeated, and as The Times said yesterday nothing is so impotent as a Government who have been challenged and beaten. The Chancellor, in this most grave matter, has a duty not just of exhortation, but of example. The Government are the biggest employers. He ought to proclaim that he will use his influence firmly and openly on the side of non-inflationary settlements. That is a duty that will sometimes mean saying "No" and meaning "No".

Mr. Roy Roebuck: To the teachers?

Mr. Macleod: The Economist, on 4th April, commenting on the 1966 General Election, said:
Labour talked of economic expansion, and its much-publicised national plan when everybody with any economic knowledge (including Ministers) knew that the Government was almost certainly going to resort to deflationary policies as soon as the election was over.
Then, commenting on what is happening now and the similarity to events preceding 1966 the Economist goes on:
Her Majesty's cabinet is divided between men who think that this repetition of last time's pre-election fraud is jolly clever, and those who are secretly sick at heart at thus living again a he.
I believe that to be the correct analysis of the present position, but time is running out for the Prime Minister. It matters not when he calls a General Election, whether he calls it soon or whether he faints into a corner for 1971. People trusted him, and he betrayed them in 1964; people trusted him and he betrayed them again in 1966. He will never be trusted again.

4.15 p.m.

The Financial Secretary to the Treasury (Mr. Dick Taverne): Before I come to the actual Budget proposals, like the right hon. Member for Enfield, West (Mr. Iain Macleod) I want to say something about the background to the Budget.
The best illustration of the complete turn-round but there has been since last year has been the content of the speeches of right hon. Gentlemen opposite. Last year, the Leader of the Opposition was the most enthusiastic prophet of doom. With that felicity of timing for which he is distinguished he selected the very moment when the balance of payments had already turned to tell us that we were facing a deteriorating balance of payments. The right hon. Member for Leeds, North-East (Sir K. Joseph), who is not here now, said that last year's Budget was a gambler's Budget and that the gamble would fail.

Hon. Members: Here he is.

Mr. Taverne: No doubt the right hon. Member for Leeds, North-East would concede that if it was a gambler's Budget we were very good gamblers, because as the Chancellor pointed out, the Budget forecasts were nearly spot on. The most cautious was the right hon. Member for Enfield, West, but we have to expect this

from someone of his shrewdness and intelligence.
In last year's speech he quoted from the speech he had made in the debate the year before. I particularly remember a passage he quoted when he said that he prayed for a turn-round in the balance of payments position. He prayed devoutly that it would come, but he feared that it would not. I do not question the right hon. Gentleman's sincerity, but his prayers have been answered.

Mr. Faulds: He is a Presbyterian. What did my hon. and learned Friend expect?

Mr. Taverne: The right hon. Gentleman's prayers have been answered and he has risen from his knees, but we have not yet actually heard the hymn of thanksgiving.
It was noticeable that his speech today had a rather different tone, and that, except for the pyrotechnics at the end, it was in some ways remarkably unhostile. We heard rather less of alliterative events—devaluation, debt and deficit. Gone were the meticulous analyses of the last four months of the balance of payments taken month by month. Why, I wonder, have we not had these?
It is extremely important to deal in particular with the speech made by the right hon. Member the Leader of the Opposition last Monday to the Foreign Press Association. We realise that the right hon. Gentleman has a vested interest in gloom. Even so, it is somewhat surprising that he specially selected foreign opinion for the dissemination of gloom and the belittling of the achievements of the Government. Why did he choose that particular occasion to knock the achievements of the Government? Was it, perhaps, because the right hon. Gentleman is worried about the confidence which is being shown abroad in the Government?
In debate after debate we have had from hon. Members opposite the story that the only thing which would bring recovery was confidence and that the only party which would bring about that confidence was the Conservative Party. What has been a greater manifestation of confidence than the massive inflow, particularly during the last three months, of


foreign exchange? What has been a greater sign of confidence generally than the very successful sales of gilt-edged to the non-bank public.
One has only to look at the confidence shown abroad and the reactions to the Budget which my right hon. Friend introduced yesterday, which are so different from what perhaps they had been led to expect and perhaps had been expecting because of Conservative pre-election Budgets.

Mr. Edward Heath: Will the hon. and learned Gentleman kindly quote from the "gloom" in my speech?

Mr. Taverne: Certainly. The right hon. Gentleman made four points. He said, first, that the turn-round had been largely due to the buoyancy of world trade and largely due to the slow growth at home. He said that half the gains in our balance of payments position over the last five years had been due to the sale of assets in Britain.

Mr. Heath: They are.

Mr. Taverne: I shall come to that.
The right hon. Gentleman said that all our gains were being jeopardised and the devaluation advantage had been wasted because of inflation and wage explosion.
I shall take these points one by one. I start with the position on wages, which the Chancellor did not deny as being a serious aspect of the situation. I take the remarks the right hon. Gentleman made. In the first place, it was always clear that in the long term, incomes policy must be on a voluntary basis and that a compulsory basis could be used only in a crisis atmosphere. The test of the Budget is whether it has created a climate for a voluntary policy to be successfully pursued. No doubt the right hon. Gentleman has welcomed the tribute paid to the Budget by the General Secretary of the Trades Union Congress. He paid the tribute of saying that it was a sound Budget which made a voluntary policy possible.
Secondly, there is nothing to be gained, except to the right hon. Gentleman, from an exaggeration of our position. It is not true, as the right hon. Gentleman has suggested, that the devaluation advantage has gone.

Mr. Heath: That is not what I said.

Mr. Taverne: It is not true, as the right hon. Gentleman suggested, that in comparison with our European competitors the advantage has gone. At the end of last year, which was the last period for which comparable figures for the position of our competitors is obtainable, our export prices were still 4 or 5 per cent., in dollar terms, below the pre-devaluation position.

Mr. Heath: rose—

Mr. Taverne: Wait until I have finished.

Mr. Heath: rose—

Hon. Members: Sit down!

Mr. Taverne: Our wage unit costs had then risen no faster than the average of our competitors' costs. There was the same wage explosion abroad. The suggestion that the right hon. Gentleman made that the whole of the devaluation advantage is being wasted, is totally unjustifiable.

Mr. Heath: I suggest to the hon. and learned Gentleman that before he continues to mislead the House he should quote my speech. He has not quoted it on one single occasison. He has produced his own summary, which completely misrepresents the speech. Will he now, on each occasion, quote my words instead of distorting them?

Mr. Taverne: The right hon. Gentleman said quite specifically that the devaluation advantage was being wasted.

Mr. Heath: That is quite obvious.

Mr. Taverne: I will do exactly what the right hon. Gentleman asks me. [Interruption.]

Mr. Speaker: Order. Noise does not help a Budget debate.

Mr. Taverne: I will do exactly what the right hon. Gentleman asks, and quote from his speech on specific passages, but before I leave the question of wages it is noticeable that right hon. Gentlemen opposite, particularly the Leader of the Opposition, are far more eager to point to the dangers than to the remedies, except those of a most general kind, without any specific proposals to back them up. They have always proved that


they have mole concern to exploit grievances than to propose alternatives in this or any other field.
The right hon. Member for Enfield, West called for the abolition of the Prices and Incomes Board, which presumably applies to its successor. That is the only thing that the Opposition called for in the field of wages. [Interruption.] I shall return to the other parts of the speech. The only thing they have called for has been firmness in the public sector. That is the only specific proposals we have from the right hon. Gentleman.
That was the policy which was tried by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), a policy which failed in 1961. The thought that one could build a successful voluntary policy on discrimination against nurses, doctors, teachers, railwaymen, police and other public servants in contrast to those in the private sector, is, of course, a hopeless delusion. Last night, the right hon. Gentleman said that their policy was to be based on wage increases for productivity, but there were no details nor explanations of how this was to be achieved.

Mr. Heath: What did the Chancellor say last night?

Mr. Taverne: The right hon. Gentleman suggests that he has no explanation, but what did the Chancellor say? The only difference is that the Chancellor addressed the British public and the right hon. Gentleman reserved his remarks for the foreign Press.
I take the next point in the speech of the right hon. Gentleman and, since it is his desire, I will quote his exact words:
Half the improvement in our balance of payments between 1964 and 1969 can be attributed to the sale of assets in Britain to buyers from overseas.
In effect, the right hon. Gentleman said that half the turnround from record deficit to record surplus has been due to the sale of assets abroad. That is a monstrous distortion. He takes inward private investment and the sale of assets—quite apart from the fact that they add to our stock of assets—and totally ignores the rest of the flow of capital. He ignores the flow of capital abroad and the improvement in our assets position over the last five years. Then he says, "Hey, presto! Here is the solution for half the turnround from deficit to surplus."

Mr. John Smith: Is that not precisely the method which enabled the Prime Minister to construct the deficit that he said he was left with?

Mr. Taverne: Unlike the Leader of the Opposition, the Prime Minister took the same figures which have always been used about the basic balance, whereas the Leader of the Opposition selectively took only inward investment and disregarded the outflow of investment. That was completely different and totally dishonest.
I notice that there are no more requests for quotations. If the right hon. Gentleman has to have regard to this kind of distortion to explain away the success of the Government's policy, that shows the desperate straits to which he has been reduced. Nor was he on any better ground when he said what was largely responsible for the turn-round was the growth in world trade and the slow growth at home. As he himself showed when he was President of the Board of Trade, a large growth in world trade is no guarantee for a large growth in British exports. In 1963, when world trade increased by 16 per cent., British exports grew by 5 per cent. Nor was world growth paralleled during the past year by the growth of imports to the United Kingdom. Broadly, we kept our share of world trade last year and kept down imports because of the success of the Government's policies.
When it comes to slow growth at home, what are the facts? The facts are that over the last two years the average growth of the gross domestic product has been 3 per cent., which has been better than the average over the whole 13 years of the Conservatives and which was infinitely better than the growth record of the Conservatives in any year in which the balance of payments was improving.
Last night, the right hon. Gentleman was at it again.

Mr. Faulds: Naughty fellow.

Mr. Taverne: Last night, the right hon. Gentleman told the House that in 1968 we had had a current deficit—the largest ever—of £796 million. Where did the right hon. Gentleman get that figure from? I will give way to him if he cares to intervene. That figure bears no relation to any figure whch is published in


any report. The position was that in 1968 the current deficit was £309 million, not £796 million, and that included United States aircraft. Where did the right hon. Gentleman get his figure from? So much for the right hon. Gentleman as a commentator on economic affairs.
Perhaps there is one more point which I should mention. The right hon. Gentleman came out last night with the statement that one month's wage increases and one month's price increases would undo the effects of the Budget. That comment is no more valuable, despite the brave attempt of the right hon. Member for Enfield, West to under-write and support it, than any of the other comments to which I have referred. Of course, regard must be paid to price increases, but regard must also be paid to increases in personal disposable income.
The Budget Report, which quite clearly the right hon. Gentleman has still not read, shows that the consumer can expect to have in terms of 1963 prices about £900 million of goods and services per annum more in the first half of 1971 than in the first half of 1970. Put in these terms, it is possible to see the Budget concessions not as offsetting a decline in the standard of living, as the right hon. Gentleman enunciates, but as a real and significant addition to an increase in the standard of living.
I turn now to the actual Budget proposals. I want to make two points—the first in relation to monetary policy and the second, my second major point, in relation to the actual fiscal proposals. The first point is that by far the most important contribution of this Budget—indeed, of any Budget—is to the growth of prosperity. This far outweighs any tax benefits that may be given to any particular section, because most stand to benefit if prosperity and growth are firmly based.
Therefore, the first test of any Budget must be the economic test—whether it lays the foundation for a sustainable and, as my right hon. Friend said, an accelerating rate of growth. A responsible Budget will bring far more rewards than the temporary effects of any vote-catching Budget.
Therefore, the most serious criticism, which I must admit was not voiced by

the right hon. Member for Enfield, West, but which has appeared in the comments of some industrialists, would be a criticism that not sufficient is done in the Budget for investment.
The right hon. Member for Enfield, West rightly left this out; because precisely the same kind of criticism was made last year. It was then said that the increase in corporation tax was bound to affect investment, that the money squeeze was bound to affect investment; that we had been too optimistic. In fact, manufacturing investment increased by more than 10 per cent. The reason for this is that it was the right Budget, which provided a secure balance of payment surplus, which provided opportunity for export, and which provided the confidence which comes from a secure balance of payments surplus.

Sir Harmar Nicholls: Is the hon. and learned Gentleman suggesting that the increase in corporation tax did not affect the rate of investment in industry? If that is what those on the Treasury Bench think, they are living in cloud-cuckoo-land.

Mr. Taverne: The stories being put about by hon. Members opposite—the claims being made, the criticisms being made by hon. Members opposite throughout last year's Budget debate—were that it was totally unrealistic to look for an increase in manufacturing investment of 10 per cent. to 11 per cent., which was what the Government had forecast, and which is what happened. It may be that there could have been an even bigger increase, but to suggest that corporation tax then would stop a very sound and healthy increase in manufacturing investment was totally misconceived.
This year, we have gone even further First, we were quite right to avoid a pre-election boom that could be seen to be a pre-election boom, which could be seen to be short-lived, and which would have awakened fears of a later period of stop. Instead, the Budget is clearly designed to achieve the fastest rate of growth consistent with productive capacity and with the present position of strains on that capacity. There is the prospect of growth—not only a growth in exports, but of a 4 per cent. increase in consumption at home, which should create the right kind


of climate for the expansion of investment in manufacturing.

Mr. Peter Hordern: The very helpful Preliminary Estimates of National Income which the hon. and learned Gentleman has personally presented to the House show that the total investment in plant and machinery in 1969 was less than it was in 1968. Would the hon. and learned Gentleman like to square that with what he said about the total level of manufacturing investment last year?

Mr. Taverne: I would have to refer to the White Paper for that. By the time I got there, I should be completely diverted from my speech. What I can tell the House, and what is universally accepted, is that the rate of increase in manufacturing investment in 1969 over 1968 was 11 per cent., which is a very healthy rate of increase.
Apart from the general prospects, which in some ways are the most important, there are particular selective incentives which will be far better than any possible cut in the corporation tax rate. The industrial building allowance should be a very useful aid indeed to the building of new factories, with particular emphasis on the development and the grey areas. It should help the building industry, which should also be helped in other ways.
Some of my hon. Friends have expressed fears about housing. I have no doubt that the private house building industry will be helped—first, by the cut in Bank Rate, which will affect the pattern of short-term investment rates and which is bound in due course to make the building societies look again at their rates if there is a large inflow. Secondly, housing is bound to be helped, quite apart from the measures already announced, by a real increase in personal disposable income.
Turning from the particular measures in the way of the industrial buildings allowance, there are the other measures for the limited relaxation of credit restraints. It was inevitable that attention after the Budget should be concentrated on the fiscal changes. In so far as growth is more important than tax benefits, and in so far as money supply has a vital bearing on growth, I do not

think that anyone should under-estimate the effects of the limited relaxation in the monetary field.
Not only has Bank Rate been reduced, but, whereas, last year, domestic credit contracted, we see this year a sizeable increase. Whereas, last year, there was a decline in the restricted lending of the banks, this year we foresee a 5 per cent. increase in the restricted lending of the banks. As we can expect a sound balance of payments surplus and a 3½ per cent. growth in the gross domestic product, and with specific aids such as the allowance, the reduction in Bank Rate, the reduction in bank lending, there is also every reason to expect a good increase in industrial investment in the course of this year.
I come to the fiscal measures which the right hon. Member for Enfield, West has criticised. The right hon. Gentleman is very cagey and cautious, in that he never commits himself to a budget judgment. Yet we would like to know what would be the right hon. Gentleman's own view if he had to take a decision about the increase or the remission of taxation. He plays it safe and refuses to stick out his neck by making a judgment which any Chancellor, every person in authority, is bound to make. His refusal to make any sort of Budget judgment is to some extent an act of irresponsibility when it comes to measuring how much should or should not be conceded.
The real question is whether £170 million—if this is accepted as the amount which is available—could have been better used. I agree with the right hon. Gentleman that there is a disadvantage in eliminating the reduced rate band and I concede that it is unsatisfactory to have a tax profile which, in any event, is not a satisfactory tax profile, starting at the 32 per cent. rate. But the real question which one has to face is whether or not there is any other change which could have been more favourable in trying to help those who most needed help in this Budget.
The right hon. Gentleman said that he would have gone for F.A.M. plus clawback. He must have been suddenly converted, because I remember that two years ago, when F.A.M. plus clawback was introduced, he said in the Budget debate then
Now there is a new principle "—


the clawback—
and a thoroughly bad one."—[OFFICIAL REPORT, 20th March, 1968; Vol. 761, c. 437.]
Now he has changed his mind.

Mr. Iain Macleod: In part, the answer is yes, because, as I explained, I believe that the long-term answer—if there is one—is a form of negative income tax. But, failing that, I see no solution in the short term except an increase in family allowances, and, given the amount of money the Chancellor has, that implies claw-back. Although I do not like it, I believe it to be the right answer.

Mr. Taverne: The right hon. Gentleman has been extremely frank. This is very much the problem which the Chancelor faced in 1968. What the right hon. Gentleman is saying, in effect, is that he then took the right decision.
It would be a mistake to go for F.A.M. and clawback at this stage, when we are waiting for the latest report of the Family Expenditure Survey, and the Finer report.

Sir Douglas Glover: On a point of order, Mr. Deputy Speaker. The hon. and learned Gentleman has twice used the expression "F.A.M." I understand that the English language is supposed to be used in the House.

Mr. Deputy Speaker (Mr. Sydney Irving): Perhaps the Financial Secretary can help the hon. Gentleman.

Mr. Taverne:: I was only following the right hon. Gentleman who used the expression on an earlier occasion.
A very serious matter is the question whether the charge that the poor have become poorer under this Administration is made out. If hon. Members look at the figures which, to my mind, are quite conclusive, the charge cannot possibly be maintained. I know that the right hon. Gentleman did not commit himself to it. He sat on the fence. But if one looked at the real increase in supplementary benefits, or in insurance benefits generally and in pensions—which have been a real increase of 20 per cent., and compared that with the increase in consumption of 9 per cent., there is no doubt whatever that a much larger share of consumption has gone to the lower-paid or to the poorer.
But in this particular case, where the Chancellor had about £170 million to give away, what was he to do with it? One alternative which was suggested was that he should have gone for a 6d. or a 3d. cut in the standard rate. Even if the 6d. cut did not go down to the reduced rate band it would still have cost £225 million, but would it have helped the average industrial earner? The answer is that it would have given him less help than the Government scheme.
A 6d. cut off the standard rate, without affecting the reduced rate band, would have meant a difference in the course of a year to the average industrial earner on a wage of £26 16s., married with two children under 11, of £7 8s. per year, marginally less than the benefit which he would be getting under this scheme. The man earning £10,000 a year would have received a much larger benefit of £190 and the man earning £1,000 a year would have received nothing at all.
Therefore, with a 6d. cut in the standard rate the average earner would have benefited marginally less, with all the real benefits concentrated at the top, whereas under the Government's scheme the average earner benefits slightly more, with all the benefits concentrated at the bottom.
The right hon. Gentleman suggested that 3d. could have been taken off the income tax. If this had been extended to the reduced rate band, which would have been possible, perhaps, with a 3d. cut, the total cost would have been about £182 million, or marginally more than under the Chancellor's package. But what would be the effect of that? Even if it had been extended down to the reduced rate band, which would make it somewhat more egalitarian it would have meant that a man earning £10,000 a year would have got £98 a year and that the average industrial earner would have received a benefit of £6 18s. 11d., and that the man earning £1,000 a year would have received a benefit of £3 2s. 9d. In each case I take a married man with two children under 11.
There is no doubt whatever that the only way in which one could concentrate the benefits where they were most needed—at the bottom end—was through the kind of scheme which the Chancellor has produced in his Budget.

Mr. John Hall: Would it not be necessary to reduce the tax by 3d. in view of the introduction of decimal coinage next year, or is it intended to increase the tax?

Mr. Taverne:: The hon. Gentleman does not understand. Tax is worked out on a basis of tables. At the moment, it is worked on the basis of 41·25 per cent. Whether worked on the basis of 40 or 41·25 per cent., there would still be tables. There would be no real saving in time even if 40 per cent. were the rate in force.
If one looks at the policy for tax and, indeed, the policy for public expenditure of the party opposite, with a cut in public expenditure in respect of agriculture subsidies which would put up the cost of food, a cut in housing subsidies which would mean an enormous increase in the rent of the ordinary council house, and, in addition their tax changes in the form of a value-added tax, which according to The Times and our own calculations, would mean, with replacement of selective employment tax and purchase tax and nothing else, an increase in the cost of living of about 2 per cent. Bearing in mind also that their tax changes would mean an increase in the number of civil servants as well as an increase in the cost of living of 2 per cent., without even affecting direct taxation, it is clear that there can be no policy of social justice from right hon. and hon. Gentlemen opposite.
This Budget gave the best tax relief where it was needed—to the old-age pensioners, to the lower paid and to married couples. The Budget has provided a combination of growth with social justice. It is a responsible Budget which is in complete contrast to the totally irresponsible attitude taken by the Opposition.

Several Hon. Members: rose—

Mr. Deputy Speaker: Mr. Jeremy Thorpe.

Sir G. Nabarro: Before the Financial Secretary sits down—

Mr. Deputy Speaker: Order. A large number of right hon. and hon. Members want to speak in the debate and I hope that the hon. Gentleman will allow me to proceed. Mr. Thorpe.

Sir G. Nabarro:: Before the hon. and learned Gentleman sits down, may I ask him a question?

Mr. Deputy Speaker: Order. I have called Mr. Thorpe.

Sir G. Nabarro:: On a point of order, Mr. Deputy Speaker, I refrained from interrupting the hon. and learned Gentleman at any stage. Is it not in order in the House to ask the hon. and learned Gentleman to respond to a short point before the next speaker is called? That is what I am doing.
The hon. and learned Gentleman referred to helping the old-age pensioners. Is it not a fact—

Mr. Deputy Speaker: Order. The practice to which the hon. Gentleman the Member for Worcestershire, South (Sir G. Nabarro) refers is not an absolute rule. It is usually at the discretion of the Chair and it is a discretion which is not always operated when a large number of right hon. and hon. Gentlemen wish to speak.

4.50 p.m.

Mr. Jeremy Thorpe: Now that the question of who has sat down and who has stood up has been resolved, may I speak briefly.
First, may I congratulate the Chancellor of the Exchequer—as did the right hon. Member—on his presentation of his Budget statement. I also welcome unequivocally the turn-round in our balance of payments and the massive repayment of short-term debts. I hope that that will certainly be a matter upon which the whole House can be in agreement.
There are many factors which account for the turn-round in our economic position, but I am sure that the Chancellor would be the first to recognise—and would under-estimate at his peril—the contributory importance not only of the devaluation of the £, a long overdue piece of realism, but the revaluation of the deutschemark, which has improved our own position vis-à-vis our fiercest competitor. To ignore those factors is to disregard something which will be of continuing significance in our economic position, whatever may be the different policies of Chancellors of the day.
It seems to me to underline the major importance to economic stability of having sensible and realistic exchange rates. If devaluation had been earlier, and properly planned, we might have had an even more encouraging position today. Accepting that the delay, despite Cabinet collective responsibility, is something which the Chancellor inherited from his predecessor, whether on that inheritance he will have to pay death duty we shall see after the next election.
Just as important as the Budget itself are some of the economic events which precede it and which affected it, and some of the relaxations which may or may not follow. Unlike the Opposition, I do not elevate the Budget into a sort of mystical rite in which one rushes in and books seats at seven in the morning—with at least one top hat still—

Sir G. Nabarro:: Two. Wrong again.

Mr. Thorpe:: The hon. Gentleman was so far to my right that we were obviously not on the same wavelength. I do not believe that the Budget is a one-day exercise which sets the whole course of a complex economy for the following year.
If the first half of this Budget was an exercise in euphoria, the second half was a clasic exposition of the anti-climax, partly because the Chancellor's room 101 manoeuvre had been virtually lost. This is attributable largely to the collapse of the Government's own incomes policy. I do not take the view of the Opposition that the first people to go to the scaffold must be those in the public service. I am not a worshipper at the shrine of St. Selwyn. The massive increases which have had to be paid to public servants have been paid because they have lagged so far behind, because they have very little bargaining power. But there is danger in what happens in wage increases among those with greater power—not the public servants, who are relatively without great bargaining power—and in certain cases with monopoly power.

Mr. Joel Barnett: The right hon. Gentleman makes the point that the failure is due to the failure of the Government's incomes policy. To what extent does he reckon wages would have been restrained, even assuming we had continued a statutory

incomes policy, on the basis of the amount of the restraint in the past?

Mr. Thorpe:: The hon. Gentleman asks me to what extent wages would have been restrained. That depends on whether the Government had carried forward their declared intention and had taken those legal powers. Frankly, I consider that if they had gone forward in that way, there would probably have been a general strike and a complete industrial breakdown in the country. This is why I never supported the Government's prices and incomes policy, and, indeed, neither did most of the Labour Party, which is why the Government Front Bench had to give it up.
But, to take up the hon. Gentleman's question, the norm was 3 per cent. and latterly 4½ per cent., but now one has to have regard to across-the-board wage increases of from 11 per cent. to 21 per cent. One may be able to justify any particular wage increase, but the fact remains that it has been in direct breach of the sort of incomes policy which the Government have always said is vital to our economic salvation.
What we have had since last autumn has been a sort of "do-it-yourself" Budget, in which those who are strongly organised have decided, before the Chancellor had the right to do so in his Budget, what share they would take of our increased prosperity. I do not believe that there can be a Budget with the sort of bonanza which, I am sure, many hon. Members would like before a General Election—it is human nature—until one has an incomes policy which concentrates on plant bargaining and productivity deals and gives to the Commission for Industry and Manpower powers to deal with the abuse of monopoly power.
That is why I say that that must be one of the vital factors in the Government's economic policy, for without it the freedom of manoeuvre open to the Chancellor will always be circumscribed at every Budget. If the Financial Times is right this morning in forecasting money wage increases of between 12 and 15 per cent. in the coming year, this shows how great is the divergence between the Government's declared norm and the actual outcome.
I welcome the tax reductions, even though some are timid and some are old-


fashioned. I regret that, with the honourable exception of the old-age pensioner, there are few, if any, of the sort of social security benefits which, I should have thought, would be one of the social priorities to be the declared objective of a Labour Administration. I think of child poverty, family allowances, and those who are too poor to pay tax at all. I should like to have seen a greater emphasis on people in that sort of category, and I suspect that I carry certain hon. Members opposite with me in that.
The abolition of the reduced rate of income tax may well have a disincentive effect, for this reason. In its incidence, taxation should be rather like a smoothly driven car; in other words, with the clutch used to go smoothly into higher and higher gear—or higher and higher rates of taxation.

Sir D. Glover: Or lower and lower.

Mr. Thorpe: Or lower and lower, but sometimes, if the car is going faster, one does not mind being in a higher gear. This argument could well be taken up between those who talk about the cost of living and the standard of living in another context, which would be out of order now.
It is true that there will be many taxpayers who will be able to coast along in neutral rather further along the road. But I take as an example the single wage earner earning between £12 and £13 a week. If he had a wage increase of £1 a week before this Budget, his taxation would jump by about £12 in the year, whereas as a result of the Budget it will go up by about £17. Time and again, one can give examples to show how, as a result of this particular proposal, the driver will go from neutral to third gear, which will have the effect of giving the car a jerk. It is, therefore, retrogressive that we are not smoothly progressing in our tax incidence. [Interruption.] There may be some who are in need of a rebore.
Perhaps the greatest disappointment from the Chancellor—I say that as a compliment to him, because I should have expected it of him—is that he has for the third time ducked real root and branch tax reform. To take the position of the surtax payer, it is true that the

right hon. Gentleman had in mind the incidence of collection costs, and had a vision of relieving 180,000 people from the incidence of this tax, but he must surely have had in mind, also, the appalling pressures on the staff of the Inland Revenue, who, owing to the complexity of our tax laws and the archaic survivals from the past, have got into such an appalling situation in the administration of our tax system that only last autumn the Ombudsman was able to say that 37 per cent. of the cases of maladministration which he investigated were well founded and were due simply to pressure of work—nothing else—and that at any one moment there are ½ million pieces of unanswered paper circulating in departments of the Inland Revenue.
It is true that there will be a saving of 325 members of the staff this year and 360 next. I wonder whether, to take another example, if the starting rate of capital gains tax were raised from £50 to £250, what would be the saving in Inland Revenue staff.

Sir G. Nabarro: Scrap it altogether.

Mr. Thorpe: If a married couple with an income of £600 a year are now to pay 13s. 9d. in income tax, what will be the cost of collecting that massive sum of money?
The Government yesterday published the Estimates and a Memorandum by the Chief Secretary to the Treasury. It was a convenient time to do so, because it was not perhaps the day when it would attract most attention in the Press. It is extraordinary to see that the number of staff in the Civil Service has increased by nearly 23,000 in the past year, despite the Prime Minister's assurance that it would not go up by more than 7,500. I accept the position of the Ministry of Posts and of National Savings.
Whether the Prime Minister had that changeover in his mind we do not know, but at a time when the Inland Revenue staff has gone up by more than 2,500 to a total of about 68,000, I regret that the Chancellor, who is a reformer, if nothing else—and he is many other things—has not been a reformer in changing the basic tax structure. He was a reformer at the Home Office and we had hoped that he would be a reformer as Chancellor, but for the third successive year he has not changed the structure.
I welcome the changes in the selective employment tax, not least for the live theatre, and a movement towards a payroll tax, which I hope will ultimately be turned into a regionally varied payroll tax. This would be a much more effective form of tax than the blunt instrument of S.E.T.
There is one minor matter on which I would like to ask the Treasury Bench for elucidation, concerning the question of special deposits. There is a rate of half of 1 per cent. for the London clearing banks and a quarter for the Scottish banks. I welcome any assistance given to Scotland, which reinforces most richly the Liberal benches, but why is there this difference? If it is made for Scotland, why is it not made for Wales? Interests in Wales have already expressed some anxiety about this.
I do not take the cynical view that there will be an autumn Budget, for the simple reason that it is not necessary. The Chancellor has the regulator, Bank Rate and all the necessary fiscal weapons to do what he wants to do without the necessity of an autumn Budget. Purchase tax, Bank Rate and all the other matters can be attended to if, on reflection, he finds that he has been over-cautious in the Budget.
What I think is unfortunate is that in a sense the right hon. Gentleman is in the position of being one of two Chancellors. He is Chancellor of the Exchequer, but there are also those who are powerful enough to determine for themselves what will be their share in the economy. This is one of the most difficult problems to solve in a civilised and progressive society. Until we can get prices and wages linked to productivity, we shall continue to see the splendid fruits about which the right hon. Gentleman talked in the first section of his Budget speech raided before we reach the Budget.
I in no way detract from the pleasure of seeing the turnround in our balance of payments and the massive repayments of short-term debts, but I would have liked to see in this year's Budget a radical reform in our tax laws, more social security benefits and a greater emphasis on the need for a wages policy. This was a Budget in a minor key. The Chancellor was cheered because he skilfully presented it. I should have liked to hear him cheered for a Budget in a major key

which was far more radical and able to do something far more dramatic for the poorer section of our community.

5.5 p.m.

Mr. David Ginsburg: Both the right hon. Member for Enfield, West (Mr. lain Macleod) and the right hon. Member for Devon, North (Mr. Thorpe) found it very difficult to fault the Budget. I found it very difficult to disagree with anything said by the right hon. Member for Devon, North. I commend his comments about the tax system and his call for simplification to my right hon. Friends.
I welcome the Budget, and it is a very agreeable experience to be able to welcome one. I welcome it for national reasons, first, because it is a good Budget for the £. Second, I welcome it for respectable constituency reasons, because the tax concessions will be extremely welcome in a low-wage area, and where cheaper money will also help people with problems in buying their homes.
My right hon. Friend the Chancellor has been commended for his forecasting accuracy. Perhaps the most accurate of all his forecasts was that there would be two years' hard slog. It has been precisely that, and it is very pleasant that the fruits are beginning to be garnered. We have the largest sustained surplus since the war, and it is right that on these benches we should take pride in this and commend the Chancellor for not wishing to throw this advantage away. Therefore he was right to take a cautious view and not to relax over-much.
It is worth looking back, not to 1822, but certainly over the post-war years. We have experienced about four major recoveries in our balance of payments in that period. The first was under Sir Stafford Cripps, but this was then lost with the Korean War. After the second, under Mr. Butler, as he then was, the fruits were thrown away in Election Budgets. After the third recovery under Mr. Heathcoat Amory, as he then was, in 1958 and 1959, they were again thrown away in Election Budgets. The right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) managed a certain degree of recovery, which his colleagues frittered away once again. My right hon. Friend has a great opportunity, but also a great responsibility, in view of recent history.


Therefore, he is right to be cautious and not to give too much away.
There are tax concessions of great importance that I could advocate, but I cannot responsibly suggest that a bigger total of concessions would have been justified. Thus I can see a very strong case for larger cuts in income tax, but if they had been embarked upon there would have had to be compensatory increases in selective employment tax or indirect taxation. I do not think that this would have been easy administratively.
The right hon. Member for Enfield, West referred to unemployment. Clearly, the level of unemployment gives concern in the House, and no one can afford to be complacent about it. But the figures should be interpreted with a number of caveats in mind. A big expansion in the economy is under way, and the various measures to help the building industry will stimulate employment. But it is important to realise that the level of vacancies is already growing. It is a level which would have suggested a much lower unemployment figure in previous years. Better social security arrangements mean that transitional unemployment figures are higher than they used to be, and for social reasons a certain amount of unemployment among older miners is carried in the unemployment statistics. Therefore, we would hope that in the future the unemployment figures will show a downward trend.
Nevertheless, the problem should not be minimised. I am particularly glad, therefore, that the Chancellor is revising—although I imagine that it will take a year—the method of collecting selective employment tax. The new method of collecting it and converting it into a payroll tax will have a beneficial effect on the trend of employment and unemployment in the long run.
I want to convey some thoughts to the Government on S.E.T. The Chancellor mentioned the Reddaway Report, in which a number of factors came out—first the advantage of the tax as a major source of revenue; secondly, its ease of collection and, thirdly—although this is questioned by some hon. Members—its help to productivity. It is necessary, in order to strike a balance, to consider

some of the snags and difficulties of S.E.T., and I shall mention three. The first is its effect on employment, the second is the question of taxable capacity and whether the tax is bearable, and the third is concerned with certain problems of definition and administration.
I want to deal with the last difficulty first, because I have a constituency interest. The Reddaway Report highlighted the fact that the reclamation trades are hard done by. Certain of the reclamation trades have been relieved of S.E.T., but others have not. As the Chief Secretary will know, because he is a Yorkshireman, the rag trade is centred in my constituency and the constituency of the hon. Member for Batley and Morley (Sir A. Broughton) and, quite unjustly—because it is part of the textile industry—it pays S.E.T. My hon. Friend surely cannot find any logical justification for the differentiation that is being indulged in, and I hope that it will be possible, even before the next Budget, for the Government to take some administrative action to tidy up the situation.
My second reservation about S.E.T. concerns the problem of unemployment. Although I take a more buoyant view of future prospects than do some of my colleagues, I agree that there is a longterm problem, arising from the fact that we now have tighter monetary disciplines—which may go on for some time—faster automation, and better social security. All sorts of trends are at work, pulling people away from the labour market. S.E.T. has unquestionably made the employment prospects of part-timers, old and disabled people, and lower-paid workers, rather worse.
We must therefore welcome the new approach of the Chancellor towards S.E.T. The fact that it will be a payroll tax—a percentage tax related to the wage bill—will make it a more justifiable and useful tax, economically, and will avoid some of the injurious social consequences that were in danger of occurring.
The third problem concerning S.E.T. is that of taxable capacity. There are limits to this. Above all, we need a broadly-based system rather than one that takes a lot of tax from one sector. In defence of S.E.T. it can be argued that company taxation in the United Kingdom. compared with that in other countries, is not too high, and that it is therefore


a justifiable tax and in that sense should be supported.
Looking to the future, however, I have one reservation. The load of earnings-related S.E.T. that will be brought in must be seen not on its own but in relation to earnings-related social security, which is borne by the employer. In the years ahead, with the national superannuation scheme, companies will be bearing a heavier load in relation to their work force, in terms of social security and the National Health Service contribution, and I should have thought that that would place some limit on the long-term expansion of S.E.T.
I conclude that S.E.T. cannot rise too far. It is not a panacea for all our economic problems; it is a useful additional source of revenue, but it has limitations. The burden of taxation in this country must be shared by income tax, company taxation and indirect taxes as well as by S.E.T. It would be a mirage to suggest that we could have vast income tax reductions by a heavy increase in S.E.T. There is no way out of our tax problems in that direction.
Decimalisation is another aspect of our problems. The Chancellor's speech set a welcome example. He indicated that the Government were determined that decimalisation must not be used as an excuse for price increases, and proposed, so far as lay within his power in matters for which he was directly responsible, to set an example. We welcome the concessions in terms of decimalisation that the Government have undertaken, but there is one matter that has not yet been settled, namely, the question of the sixpenny piece. I am on record as having expressed the view that the previous Chancellor chose the wrong system of decimalisation. But there we are; it is with us, and we must minimise the harm that has been done.
I would have thought that on the cost of living argument—the need to minimise unnecessary increases in the cost of living—there was a powerful case for retaining the 6d. If it is not retained great dangers may arise in many areas, involving quite unnecessary and unjustifiable increases in the cost of living. The question of the 6d. and decimalisation is a matter of higher Government and national policy, and not merely a matter

for the Decimal Currency Board. I make a strong plea to the Government to think again and to reprieve the 6d. for the early transitional period of decimalisation.
The whole emphasis of the Budget and its tax reductions was on the loss of £175 million to the Revenue in respect of personal allowances. As far as it went it was right, from the point of view of equity. I have known the Chancellor for many years, and years ago I studied his writings on equality. I am not surprised at the line of action he took, because this is an egalitarian tax cut, which can be defended. It is based on egalitarian terms. But it also involves a procedure which probably imposes the least burden on the overloaded Inland Revenue machine.
However, taxation is not merely about equity; it is also about psychology, and the considerations which the Chancellor mentioned in his speech about the growing burden of income tax in an expanding economy still apply even after these concessions have been made.
The right hon. Member for Devon, North referred to the sharp entry at the marginal point into income tax. At this point there could well be an element of disincentive. I readily concede that there is a change, not only in the thinking on this subject among many hon. Members in my party, but in the climate of the times. I recall that when the Royal Commission on Taxation of 1952–54 reported, it used social research to justify its argument that there was no disincentive in taxation on overtime, and it put this argument very powerfully.
Speaking for myself, but I think that many other hon. Members on both sides of the House would say this from contacts with their constituents, I find it difficult in my innermost conviction to go along with that generalisation. From speaking to one's constituents one knows that there is a concept of take-home pay, that a worker is acutely conscious of his take-home pay which is his gross pay less deductions for social security and income tax. If this is so, I hope that further thought and further research will be devoted to whether at the margin there is a disincentive effect in income tax. If not this year, I hope that next year the next priority will be a cut in earned income tax, for that would be of great benefit to the country's production.

5.23 p.m.

Mr. Tom King: On the first occasion that I have the honour to speak in the House, I should like to pay a tribute to my predecessor as the Member for Bridgwater, the late Sir Gerald Wills. Hon. Members on both sides of the House who knew him for longer than I did need no words of mine to speak of his record of loyalty and service to the House of Commons. Suffice it simply to say that the affection and respect in which he was held by the House were echoed to the full throughout the length and breadth of the constituency which he served so many years so faithfully and so well. If I may add a small personal note, his friendship and kindliness to me at a time of great personal disappointment to himself when he first realised that he would not be able to stand again was something which I shall always remember.
I have been advised on the virtues of brevity. As I recall, the Chancellor of the Exchequer yesterday also extolled the virtues of brevity and perhaps I ought to explain that he and I have slightly different interpretations of the word. I understand that it is customary on these occasions to speak of one's constituency. I appreciate that this may be a boringly parochial exercise, but the nature of my constituency is sufficiently varied for there to be many lessons to be drawn from it and from the Budget which are of relevance to many other parts of the country.
Against the background of the considerable publicity that my by-election, as the first vote for the 18-year-olds, attracted, particularly certain references to the history of the constituency, I should like to reassure you, Mr. Deputy Speaker, that my expenses were entirely in line with the schedule laid down by Parliament and bore no comparison with those of some of my predecessors in the seat—the one area at least in which the cost of living seems to have had a dramatic reduction.
If I speak first about the industry in he constituency it is because, while it is not normally regarded as an industrial constituency, there is a considerable amount of industry in it. The situation of that industry is, as in many other parts of the country, that we have our pockets

of success and we have our pockets of unemployment. Where we have older businesses, businesses which have died or which are in decline, we desperately need the stimulus and incentive of new businesses to take their place. I looked in vain to the Budget for a real encouragement to new business.
We need help for the smaller businesses. My neighbour, the right hon. Member for Devon, North (Mr. Thorpe), has greater attractions than I, if I may put it in a personal way, as he is a development area, if I may personalise it again, and I am not, and this emphasises the need for a more flexible approach in the granting of certificates and the handling of regional development expenditure.
The Government have rightly drawn attention to the reduction in Bank Rate, but in looking for a stimulus to new development and new industry I suggest that Bank Rate has merely changed from being quite impossible to totally penal. Moreover, on top of that a very telling remark was made in the Chancellor's speech when he referred to the danger that the cumulative effect of stringent measures could become increasingly stringent without its being appreciated. My fear is that even this modest reduction will do no more than hold the situation where it is, and it is far too tight for any real generation of new business.
The other industry in the constituency is increasingly recognised throughout the country as having considerable potential for the balance of payments. It is the tourist industry. I am sorry that we have now lost the hon. Member for Smethwick (Mr. Faulds). One need not go as far as he did with Miss Lorna Doone to know the attractions of my constituency. This is an area which, if one defines it in financial terms, has more than its fair share of the fixed assets of the British tourist industry. It is part of that sector which is at last getting recognition—the earnings capacity of the invisibles. As we move into the Jumbo age this industry, so heavily penalised with S.E.T., could have looked for some real encouragement to enable it to cope with the growth potential of the future.
In this connection I am grateful for the courteous welcome that I have had from hon. Members on both sides of the


House in their own ways, although perhaps I could have done without the welcome of the Minister of Transport, who chose my arrival to close the one remaining branch line in the constituency. The implications of that decision are far-reaching and I promise him more of that anon.
Another significant activity is agriculture. One does not have to have a close knowledge of the debtor situation of a number of agricultural merchants in the constituency to realise what a critical situation agriculture is in. I looked to the Price Review for some help, but it was minute. I looked to the Budget for some help, but these are only marginal improvements. There is nothing in them which can enable the industry to get back on its feet and move forward again. The Budget might postpone, but it cannot avert a critical situation.
Another feature in which the constituency is unusual is in the number of retired people. In this it may anticipate a situation, as anybody familiar with the population trends will know, that will become a much greater feature of a number of other constituencies. I was thinking of them when the Chancellor said that if inflation got its grip, the weaker members would suffer. It occurred to me that he appeared to be referring to the future, but for the retired people in my constituency inflation has had its grip for many years.
I find it immensely sad that many people who have retired to my constituency, and thoughtfully made provision for their future, including what they considered to be adequate provision for some increase in costs during that period of retirement, find that the cost of living has escalated so rapidly that this provision is now totally inadequate and they are forced to depend on the State for their subsistence. If we are to have a high-wage economy it must generate a prosperity in which all sections of the community can share.
The feature that created the most attention in the by-election, as I mentioned, were the 18-year-old voters. I want to end by saying a word about the young people in my constituency, relevant to young people throughout the country. They have lived for too long in a siege economy. They are looking now for a real incentive and encouragement for the

future. They listened to this Budget and they found not the imaginative voice for the future that can assure them of a future and potential opportunity but instead a continuation of the same slow grind, albeit slightly modified.
I looked at the Budget for two main aims. I looked for help for the weak, the unprotected, the vulnerable, those who have not the market power to demand and achieve their ends. I looked for Government care and concern for them and I looked for a real message for the future. In both I was disappointed, and with great regret I listened to a Budget that to my mind has missed a great opportunity.

5.32 p.m.

Mr. James Dickens: It is a very real personal pleasure to congratulate the hon. Member for Bridgwater (Mr. Tom King) upon his maiden speech this afternoon. He spoke fittingly of his constituency, which has been almost continuously represented here since the 13th century. He spoke, too, with wit, fluently, thoughtfully and well. We value his experience outside this House and look forward to hearing him again.
The right hon. Member for Enfield, West (Mr. lain Macleod), who has kindly explained to me that he would be unavoidably absent this afternoon, sought to launch a major attack on Government economic strategy. I thought that his attack completely and utterly failed because he really has not very much to say, because there is a basic agreement between the Opposition Front Bench and the Government on central economic strategy. For the Opposition this position is the worse confounded by the fact that their policy—if one can call it such—is a mass of contradictions.
We have, on the one hand, complaints about the cost of living, yet they call for a value-added tax which can only exacerbate inflation. They demand cuts in public expenditure, yet they would spend at least an additional £300 million per annum maintaining a military presence east of Suez. They complain about the high level of unemployment, yet the right hon. Member and his party have consistently supported the Government in every major deflationary step since 1966 to defend the £ at a fixed sterling parity, and subsequently to achieve a


massive surplus on the balance of payments. They really are in no position to launch any attack on this Government's policies because if they had been in power in the recent past the economic difficulties of the country would have been much worse. Unemployment would have been higher, the level of industrial investment somewhat lower and there would certainly have been far-ranging cuts in the social services and public expenditure generally.
I want to discuss a radically different policy. I want to argue that there is an alternative which is realisable, realistic and responsible: one our country should seek to attain in the 1970s. Before criticising certain detailed aspects of this Budget I want, as it were, to think aloud about inflation in the recent past and to discuss, openly and candidly, what part the variote components which make up the consumer price index have contributed to inflation. Incidentally, we would never have gathered, listening to the right hon. member for Enfield, West, that the Index of Retail Prices had risen by 50 per cent. between 1951 and 1964 notwithstanding a fall in import prices of 30 per cent. over the same period.
We never gather, to listen to and to read commentators outside this House, that Great Britain has enjoyed a rate of continuous inflation of the economy since 1934 and that the quality of life for the immense majority of people has improved beyond all recognition over those last 36 years. The crucial question for Britain and other advanced industrial countries is to decide how much inflation is an inevitable part of the activities of modern industrial technological society and how much above that level it becomes unacceptable and dangerous to the social fabric of the country.
Over the past five years the Consumer Price Index, as distinct from the Index of Retail Prices, has increased by 20·5 per cent. These are the figures provided by the National Economic Development Council.
What do these figures show? They show that, of this 20·5 per cent. net expenditure, taxes, or indirect taxes, accounted for about 6 per cent. of the increase. Thus, almost a third is directly attributable to Government fiscal policy. Rising import prices, including the rise in

prices following devaluation, account for a further 4 per cent. That makes 10 per cent. of the 20·5 per cent. General domestic costs make up the remainder. Within general domestic costs there are a variety of factors and I will mention three.
There is the cost of using capital in contemporary society. Capital is a scarce and expensive commodity. Thus, more and more private and public corporations are fixing their pricing policy in such a way as to secure a satisfactory return on capital. For example, in the past few weeks we heard in this House an announcement by the Minister of Posts and Telecommunications to the effect that the Post Office Corporation would have to increase telephone charges primarily to provide a higher return on capital. There are perfectly sound economic reasons for increasing prices with this justification. But clearly this sort of price increase has nothing whatever to do with wage or salary negotiations.
The second example which I give is the effect of rates of interest on advanced economies. We live in a period of historically high rates of interest. It is a sign of the times that yesterday the House could cheer the announcement of a reduction in Bank Rate from 7½ to 7 per cent. Yet British Bank Rate at 7 per cent. is significantly lower than the rate in other countries abroad. For example, for the first time for many years Bank Rate in Britain is lower than it is in Western Germany. But the effect on the price structure of high interest rates, working their way through the economy, is profound.
This leaves that part which we can attribute to increases in incomes. I think that I have demonstrated that increases in incomes are only a part, and I submit a not very significant part, of recent inflation. Now, in the first eight years of the 1960s, average weekly earnings rose by 60 per cent. Over the same period, retail prices rose by 33 per cent.
Thus, there was an increase in real average weekly earnings of 20·6 per cent. Moreover, productivity rose by 22 per cent. Therefore, over these eight years, average weekly earnings in real terms rose less than the increase in productivity. That is remarkable.
Looking at the position internationally, in every other advanced industrial country. with one exception, apart from


Britain, average earnings have exceeded increases in the cost of living and increased productivity combined. Therefore, the British position, far from being uniquely bad, is in fact rather more favourable than that today of most countries.
It is of great significance that the sole exception among comparable countries abroad in this respect is Italy, which alone has been able to contain the increased earnings to a figure below that for the average increase in productivity. Who can doubt but that the political crisis in Italy emanates, in part at least, from this source?
What can we in Britain do to resolve the problem of how we can exercise some influence from Parliament to devise a fair, voluntary prices and incomes policy? I have given examples to show that the position in Britain is not exceptional. But it is a problem, because in Britain we have the highest rate of private consumption, as a proportion of the gross national product, of any advanced industrial country in the world. This rate of private consumption is pushed upwards, as it were, by the tremendous influence of advertising, which seeks to promote among ordinary people the assumption that the good life is in some way related to ever-increasing personal consumption. This is obviously a factor in determining wage and salary negotiations.
But, given that factor, how can we cope with it fairly and justly? How can we strike a balance between a fair level of private consumption, a high and rising level of public expenditure and a satisfactory level of investment? Clearly, a statutory incomes policy is out of the question. Looking at experience of the last five years, it is evident from the most cursory economic analysis that all the political trauma which we on this side of the House went through has been virtually for nothing. In the five years from 1959 to 1964, real income rose by 14 per cent. In the five years from October, 1964, to October, 1969, real income rose by 11 per cent. Therefore, the effect of a statutory incomes policy and of its various voluntary adaptations over that five-year period was to reduce the rate of growth in real incomes by about half of one per cent. per annum. In short, it simply was not worth it.
That figure is important. But what is much more important is the fact that the rationale for a fair voluntary incomes policy was put back perhaps by a decade as a consequence of what people suffered or thought they suffered over those five years. But, if that is so, how do we take advantage of the helpful remarks made yesterday by Mr. Victor Feather about how the T.U.C. is willing to cooperate with the Government in looking into the 1970s and devising an acceptable incomes policy?
We can dismiss at once the argument of the right hon. Member for Enfield, West. All that he had to say on that subject today was to advocate a return to the days of the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd)—to take it out on people in the public sector. He said that the Chancellor of the Exchequer should set an example for employees in the public sector. We have heard all that before. School teachers, nurses, dustmen, civil servants, and even Members of Parliament are very familiar with that argument. It simply does not wash.
We must do something much more radical and ambitious. A prime responsibility rests with the Government, on the Cabinet and, in particular, on my right hon. Friend the Chancellor. We must evolve a social contract with the working people of Britain. On the one hand, we must get the agreement of the trade union leadership—and, in my view, the present quality of trade union leadership in this country is the finest we have ever had—and of the rank and file to operating a strategy for wages and salaries which is broadly in keeping with movements in the index of retail prices and with movements in productivity. This means that we in the House cannot go on bleating about inflation. We must accept now and for the foreseeable future that a rate of inflation of between 2 and 3 per cent. per annum is absolutely inevitable in this sort of capitalist materialist economy.
If the Government are to convince people that this sort of voluntary policy is workable, they must produce a Budget very different from the Budget which we had yesterday. It must be a Budget which demonstrates, first, that the Government intend to pursue as the central objective of their policy a much more


rapid rate of economic expansion combined with full employment.

Mr. David Marquand: They are doing that.

Mr. Dickens: My hon. Friend says that they are doing that. I shall come to that part of the argument later.
The second requirement is the need to convince people that we as a party and as a Government have some social objectives. Our first social objective should be to launch the long overdue fiscal attack on the growing social inequality of our times. There was no mention of that in the speech that we had yesterday.
Unless we are prepared to take these measures, unless we are prepared to recognise that these are concomitant parts of the social contract that we have to reach with the trade union movement, there is absolutely no prospect, nor should there be, of any sort of incomes policy being acceptable to the broad mass of wage and salary earners. I believe that they are prepared to accept such a policy only if we are prepared to play our part in the House of Commons, and particularly on this side of the House, in advancing economic and social policies which are, broadly speaking, aiming at an equalitarian Socialist society.
I have no time this evening, as I would much like to have, to discuss in detail some of the Budget proposals, but I want to make three comments upon them. My first comment upon them is that the central strategy of the Budget is designed to achieve a rate of economic expansion of 3½ per cent. in 1970–71. In my submission, that is totally and utterly inadequate. Other comparable O.E.C.D. countries can attain an average of 5 per cent. per annum. [HON. MEMBERS: "They do not have Socialist Governments."] In Sweden, a Social Democrat Government has attained a higher percentage, so that argument does not wash either.
The basic reason why other countries can do it and why we cannot is threefold: first, because of the endemically low rate of investment in private industry in this country; secondly, because of the burdens on the balance of payments, the first of which is the high, and continuing high, foreign exchange costs of over

seas military expenditure, which in 1969 were no lower than they were in 1965. Add to that the heavy outflow of private capital abroad, building up other advanced industrial countries at our expense, and one has a substantial part of the reason why we have to settle for 31 per cent. and why other countries can go ahead year after year at a much more legitimate rate of economic expansion.

Mr. Patrick Jenkin: The hon. Member has referred specifically to the outflow of private investment. Does he entirely dissociate himself from what his right hon. Friend the Chancellor said yesterday in welcoming the enormous improvement in the earnings from invisibles, a very large part of which are dividends and interest from overseas?

Mr. Dickens: I do indeed dissociate myself from that line of analysis. [Interruption.] That was a fairly predictable response.
I believe that the increase in invisible earnings for this country has been bought at prodigious cost to the domestic economy. We have lost £6,500 million in terms of lost output since 1966 by comparison with a growth rate of 4 per cent. per annum, a modest enough target when other countries are getting 5 per cent. per annum.
I say to my right hon. Friend that there is no future for this party in government on a rate of economic growth of 3½ per cent. If we are prepared to settle for that, it means that we are prepared to settle for second best all along the line; in terms of the level of unemployment, in investment and in public expenditure. We should be more ambitious. Unless we are, we shall finish up, even in the most favourable years, like this year, with only £220 million of tax remissions to give.
We should have had a Budget for expansion. We should have taken some of the restraints off the domestic economy; we should have had a Budget designed to promote growth, productivity and investment. I do not necessarily disagree with my right hon. Friend the Chancellor in what he has done for the lower paid, although I find it odd that a Socialist Chancellor should remove 185,000 persons from paying surtax at a cost of £5 million. The effect of this, as Table 17 of the Financial Statement


and Budget Report bears out, is that as a consequence of the Budget a married couple on £5,700 per annum get a net benefit of £57 per annum.
I know that there are problems about the incidence of surtax, but I would have thought that if a Labour Chancellor could allocate £5 million to surtax payers, we might have added another £12 million to it and taken off the hateful prescription charge.
I close by making two brief remarks. The first concerns the under-privileged. If one puts aside the modest and welcome tax reforms which affect some of them, there has been no advance whatever for people in child poverty or for the old-age pensioner, the physically and mentally handicapped or one-parent families. I take with a pinch of salt the remarks by the right hon. Member for Enfield, West that if he had been Chancellor, he would have considered using the claw-back principle to help people in child poverty. We know perfectly well that that is utterly and totally contradictory to the general thesis that the Opposition have been advancing in that it would increase taxation—that is what claw-back means—and it would also mean having an increase in welfare benefits, which are not, shall we say, universally popular on the other side of the House. I think that something more should have been done; but it can be done only if we are prepared to allocate resources for this purpose.
What we should do as a Government is to recognise that poverty in the forms that we identify it in the 1970s is an obscenity in a rich, prosperous society. We should declare that in the decade of the 1970s we will abolish poverty systematically by allocating additional sums of public revenue year by year, so that child poverty and poverty in old age and among the handicapped is by 1980 totally and utterly eliminated.
A start should have been made on that this year by making a big increase in the cash payment of family allowances by the total removal of child tax allowances for the second and all subsequent children and by paying a tax-free family allowance of 34s. a week for these children, which would have cost £130 million to the Exchequer and would have benefited every family with an income of £5,400 or below.
Finally, I draw attention to the most astonishing gap of all in the Chancellor's

Budget speech. We have a constant refrain from one year to another, which emanates, no doubt, from the Inland Revenue and the Treasury, that however desirable it may be in general terms, we cannot this year introduce a gifts tax or a wealth tax. After five and half years of Labour Government, sitting here with a still substantial majority, with the top 1 per cent. of the population still owning 42 per cent. of all personal property, as against 24 per cent. in the United States of America, it might be thought that the question should be asked: if not now, when do we make a start on this? But not only did we have no proposals yesterday from the Chancellor for either a gifts tax or a wealth tax. We have had no discussion of the problem.
I remind my hon. Friends that one of the causes of social discontent in advanced countries is the knowledge of social inequality. It was not for nothing that the National Commission on the Causes of Violence in America came to the conclusion that one of the prime causes of violence in that country was the knowledge—and, if one likes, the immediacy, at the flick of a television switch—of grotesque social inequalities.
There are many other reasons for attacking great concentrations of wealth. One of them, I remind my right hon. Friend the Chancellor, is that in 1939 Sir John Simon, in the National Government of that day under Mr. Neville Chamberlain, introduced to the House a Budget which drew 6 per cent. of Exchequer revenue from taxation on capital. Thirty years later, my right hon. Friend has brought in a Budget which takes 3 per cent. of Exchequer revenue from taxation on capital. Does not my right hon. Friend think that it surely is a modest aim to emulate Sir John Simon?
I conclude by saying that in the course of these three days we shall have the usual phoney debate between the Opposition Front Bench and the Government. In these debates, as so often in the past, the real arguments are between those of us in Parliament and in the country who are arguing for more rapid expansion and an attack on social inequality, the position, broadly, of the trade unions and Labour movement on the one hand, and the deflationists, the Whitehall establishment and the City of London on the other


hand. I hope that I have been able to launch the argument for expansion from this side of the House in a way which my hon. Friends will find no less stimulating than the Budget introduced yesterday.

6.0 p.m.

Mr. Anthony Grant: Those of us who have taken part in Finance Committees in previous years have come to respect the robust independence of the hon. Member for Lewisham, West (Mr. Dickens) and to enjoy his contributions without necessarily agreeing with a single, solitary word. On this occasion, I agree with him in certain respects. I entirely agree with him in his condemnation of the bitter price that the people of this country have had to pay for the balance of payments surplus which we now enjoy. I also agree with him in condemnation of the Budget for not tackling real areas of poverty. As an enthusiastic member of the Wider Share Ownership Council, I agree with him in being against the concentrations of wealth which already exist. I am an egalitarian in wishing to see the greater spread of wealth, but I suspect that where he and I part company is that I maintain that the greatest and most undesirable concentration of wealth lies in the hands of the Government itself; that is what I wish to see spread among people throughout the community; whereas I suspect that the hon. Gentleman, with the greatest will in the world, is driving at the end product of having all wealth concentrated in the Government and doled out into a great egalitarian society, and this fills me with the utmost depression.
There is one other matter on which I agree wholeheartedly with the hon. Member for Lewisham, West, and that is in offering the congratulations of this side of the House to my hon. Friend the Member for Bridgwater (Mr. Tom King) on his splendid speech. It was delivered with great wit, with a brevity which is a model to the Chancellor of the Exchequer, and in a most friendly manner, which recalled in moving terms his predecessor, of whom I was very fond, and whom we all greatly miss. I know that my hon. Friend will have a long and happy career in this House, as long

as Bridgwater wants him, and will also make many friends here, as I have. I wish him every success.
Before coming to the main part of my speech, may I refer to Budget Resolution 19,"Estate duty (discretionary trusts)". It is the only Resolution which was not mentioned in the Budget speech, and a number of professional people engaged in this activity have represented to me that they would like to know what it is about. I find it completely confusing and hope that whoever winds up will give a little more explanation of that Resolution.
The Budget, I fear, has come as a complete anti-climax after the exuberant prophecies about it. After five years of misery and squeeze, in which about £3,300 million has been taken by extra taxation, the Chancellor of the Exchequer gives back a mere £200 million. This is equivalent to 16 steps back and one timid, mincing step forward this year by the Chancellor of the Exchequer. This, I suppose, is what the Prime Minister meant in 1964 when he said that he would get us on the move again.
One feature of the Budget which is to be commended is that the Chancellor of the Exchequer has at last decided to make a slight shift from direct taxation to indirect taxation. For years I have advocated that what is necessary in our tax system is a shift from direct to indirect. This enhances the element of choice. People who are taxed indirectly have a choice whether or not they will spend their money. People who work harder for more money have no alternative but to pay tax on the money, and it is to the detriment of the country if they do not do so. The Chancellor of the Exchequer has always recognised this, and I was hopeful that he would shift the burden so that there was a curb on spending and an encouragement to work. I regret to say that his approach has been extraordinarily feeble and wet. He has taken 2 million people out of the range of tax, 2 million people who came into tax only because of inflation. I can see no incentive, looking at the direct tax proposals, for people to work harder and show more enterprise, which is what is wanted. This is a very half-hearted approach.
I was worried by the reference the Chancellor of the Exchequer made to the


possible use of the regulator later in the year. If, later this year, for electioneering purposes, he uses the regulator to reduce indirect taxation, the balance will be tilted yet further in favour of spending and against working, which is the very vice which I understand the Chancellor of the Exchequer to have been condemning in recent years. We shall be back to square one, or beyond square one, with all the inflationary problems from which we are suffering aggravated. This may be very good for the Labour Party in electioneering in election year, but it would be thoroughly bad for the economic future of the country. I understand that is how the Chancellor of the Exchequer wishes to be judged by history.
One key to our economic problem lies in savings. Every year since I have been in the House I have dealt with this aspect. Each year I have tried to suggest and encourage an increase in savings. Every year lip-service has been paid to me by Treasury Ministers with the pleasant parrot phrase, "Yes, of course, more savings mean less taxation", and nothing is done about it. I agree with my right hon. Friend the Member for Enfield, West (Mr. lain Macleod) that the record of savings under this Government has been deplorable by any standard. In real terms, savings have fallen by more than £2,000 million since the Government have been in office. We are well at the bottom of the international league in savings. Japan, West Germany, Sweden, France and Canada are all ahead of us in the league. This is a deplorable situation and one to which the Chancellor of the Exchequer paid far too little attention in his Budget.
Why has the habit of saving fallen away? Why has the habit of thrift disappeared from our community? I believe that it is solely due to a lack of confidence by the people in the ability or will of the Government to control inflation, and also the fear which people have that if they acquire any wealth of any sort it is liable to be under attack by the Government in one fiscal manner or another. People therefore see much greater attraction in spending their surplus earnings on goods and chattels. It is because the Government have so penalised thrift in recent years that the nation has got out of the habit of saving,

and people are more content to say, "If I save and build up some capital it will be under attack from the Labour Government; therefore, why should I do it? Why should not I spend it on consumer goods? If I am in difficulty 'they' will do something about it. I will ask the Government to dole out largesse." This is one of the reasons for a fundamental change in our habits which I attribute directly to the Labour Government.
There is obviously a need, as is sometimes recognised by Treasury Ministers, for an incentive to increase savings. Last year the Chancellor filched from my right hon. Friend the title Save-As-You-Earn and brought in his own scheme. At the time I welcomed, and still welcome, the fact that the principle of contractual savings in this country has at last been accepted by the Treasury. But I do not believe the results have been anything like as encouraging as was hoped, and indeed the record of national savings as a whole is unbelievably depressing in recent years.
I welcome the proposal made in the Budget for flexible interest rates. But there are a tremendous number of omissions from the Chancellor's speech. There was nothing to correct the damaging effect of the capital gains tax on savings. Nothing was done to alter the absurd distinction for tax purposes between so-called "earned" and so-called "unearned" income. One could go on citing the number of instances whereby the habit of saving and thrift and the accumulation and building up of wealth and property are under attack in some way or another by legislation introduced by this Government.
I do not wish in my speech to be merely destructive. I should like also to be positive. Although we want a fundamental change in our tax system as a whole in order to alter attitudes to work, spending and thrift, nevertheless in the meanwhile, in conjunction with the Wider Share Ownership Council, of which I am an enthusiastic member—it is an all-party body which is also supported on the other side of the House—we have worked out a scheme which will give an impetus to the existing Save-As-You-Earn scheme.
Last year, I tried in the Finance Committee to introduce what I thought was necessary, which was an equity element of


savings into the legislation. I failed, but at least the Financial Secretary then said:
I do not want to say that the scheme which is the subject of the Amendments is one we would reject out of hand—certainly not. But in the present climate, and at present, there is a great deal to be said for starting with the Government scheme and not extending it at this stage…".—[OFFICIAL REPORT, Standing Committee F, 26th June, 1969; c. 831.]
But he did not rule out the possibility of bringing in an equity element if the S.A.Y.E. scheme did not seem to be moving with the required dynamism.
The scheme which has been devised, and which will be spelt out in detail in the form of a new Clause in the Finance Bill, is as follows. We propose to set up an investment fund within the framework of the National Savings Committee, possibly under the management of the Public Trustee. Any other organisation, if approved by the Board of Trade, could run a similar scheme. The fund under the scheme would be invested in accordance with the provisions of the Trustee (Investments) Act, 1961. Participation in the scheme would be limited to subscribers entering into savings contracts similar to those under the existing S.A.Y.E. scheme.
The fund would be divided into notional shares or units allocated to subscribers on monthly subscription days in accordance with normal unit trust practice. Subscribers who duly complete the payment of not less than 60 monthly contributions would be entitled after a specific interval, be it one or two years, to withdraw a sum equal to the value of their units free of all liability to capital gains tax. The fund would not be liable to corporation tax. That, in outline, is the sort of scheme we have in mind which we will seek to translate into the Finance Bill when the occasion arises.
I believe that the Chancellor has not paid sufficient attention to the whole question of savings and thrift even from a philosophical point of view. The spread of ownership is absolutely necessary in this country if we are to remain free and to grow in the manner we desire. I have always believed this to be necessary for the economic strength of the country.
The Chancellor of the Exchequer says, or we believe he says, that he wants to be judged by historians rather than by

the mere electorate. One of the best ways in which he could get a favourable judgment would be if he were able to create an entirely new attitude to personal thrift and wealth, an attitude which would turn more and more earners into owners, which would stimulate the spread of ownership of all property—shares or real property—more widely through the community. But, in this context, I am afraid history will give the Chancellor no credit for the present Budget.

Mr. Richard Wainwright: Would the hon. Gentleman not agree that the Wider Share Ownership Council has the support of some hon. Members of the Labour Party?

Mr. Grant: I agree. It has support not only from Members of the party opposite, but from the hon. Member for Colne Valley (Mr. Richard Wainwright), who is a deputy chairman of the Council.

6.15 p.m.

Mr. Edward Milne: The hon. Member for Harrow, Central (Mr. Grant) will forgive me if I do not follow his remarks too closely. He paid more attention to matters of detail in the Budget than did either of the Front Bench spokesmen of his party who have spoken in the debate. It was disappointing to hear the right hon. Gentleman the Leader of the Opposition indulging at this critical period in our history in knock-about statements rather than in a serious analysis of the economic difficulties with which this country is confronted.
The right hon. Member for Enfield, West (Mr. Iain Macleod), for whom I have high regard, was less than his usual capable self in dealing with the Budget and in the manner in which he criticised it. He seemed to slip up badly when he quoted from the Lays of Ancient Rome and drew in my right hon. Friend the Member for Sowerby (Mr. Houghton) on the basis of how Horatius kept the bridge. The actions of Horatius did indeed save Rome on that particular occasion, and if that illustration is to be applied to our own Front Bench then the prospects for the year ahead are bright.
I wish to deal with two or three main factors in the Budget. Last year, I had the fortune to catch Mr. Speaker's eye immediately following the speech of the right hon. Member for Bexley (Mr. Heath), and I found the same sort of depth of understanding in his speech as


we have noticed this year. On the matter of industrial relations and also on the wages explosion, about which he warned the Chancellor of the Exchequer, I wonder whether when people talk about a wages explosion they realise the number of low wage earners who still exist in this country and with whom the Budget has dealt favourably. We never hear complaints about the salaries of High Court judges or the chairmen of nationalised industries and the others whose incomes have expanded during the past twelve months at a very high rate indeed. Therefore, when speaking of wages and their relationship to the Budget, we must welcome from the Chancellor the fact that over £200 million will find its way to the quarter where help is most needed. But my right hon. Friend must not expect that we are satisfied with the situation.
After five years of Labour Government, we are prepared to accept this Budget as a springboard giving the signposts to the year ahead. This morning, one of our national daily newspapers described it as "a social democratic budget" and referred to the redistribution of wealth. But that in itself is not enough for a Labour Chancellor of the Exchequer to indulge in since the opportunities of acquiring wealth must equally be examined. As an hon. Member said earlier, the tax opportunities available to my right hon. Friend in terms of those in receipt of high incomes are very wide. A wealth tax on the basis of dealing with those who have capital or income over £20,000 would bring in my right hon. Friend almost as much as selective employment tax does at the present time.
Those of us who represent development districts must also remember that the battle for the economy and to get our balance of payments right has been largely fought at the expense of unemployment. Having won the battle, we now look forward to the advantages and benefits accruing from that policy. That is why we welcome the incentives given in the Budget to industrial building, and the emphasis given to those incentives in the development districts.
We are extremely glad that this has been confined to the period between now and 1972. That underlines what I said last week in the course of our debate on the Coal Industry Bill. We have to

make for a target of full employment by 1974. If possible, it should be reached a lot earlier, but 1974 must be our ultimate target. The effect of the Budget on the economy must reflect itself in full employment if our policies are to be marked up as successful by those whom we represent.
While tremendous efforts have been made to give the development districts the new jobs which they urgently require, last week in my constituency an incoming firm advertised for 250 workers, and, in response, 3,500 applications were received. I do not suggest that all the applicants were unemployed. I cite the case simply to illustrate the nature of the problem which still faces the development districts. In our Budget debates, we have to be conscious of that sort of situation lying in the background. That is why high priority must be given to the incentives on industrial building, especially between now and 1972. If it cannot be done by private enterprise, in order to deal with the unemployment problem, consideration should be given to the possibility of Government Departments and State-owned industries moving into the development districts.
I listened possibly with closer interest than most hon. Members to the Chancellor of the Exchequer's praise of the Reddaway Committee's Report. I do not altogether agree with all that my right hon. Friend said about the sagacity of Professor Reddaway on selective employment tax. Professor Reddaway has argued that there has been a decrease in employment in the distributive trades. However, in the first two or three months of this year there was also a decrease in the number of people in manufacturing industries. That sort of figure cannot really be used to illustrate the efficiency of the tax. However, from what my right hon. Friend has said, it appears that the moguls in the Treasury are determined to hold on to the £600 million or thereabouts which is drawn in by the tax. It has become a cornerstone of our fiscal system.
When the necessary machinery is available, selective employment tax will be based on the payroll of the firm concerned rather than on its individual employees. While one may argue about the administrative convenience of this method, in using selective employment tax in this way my right hon. Friend is


really introducing a payroll tax and, in addition, by doing it on a payroll basis he may encourage some employers to pursue a low wage policy.
I am convinced that it is no longer necessary to be scared of paying high wages, whether they be in relation to selective employment tax or the wider economy. We have to become accustomed to the idea that a high wage economy is a prosperous one. When we make comparisons with the wages paid in other countries, generally it is found that, if their prices are lower than ours, they are gained at the expense of someone's wages. If we are to be a forward-looking nation in the years ahead, we have to accept a high wage economy. We do not want any more talk from either Front Bench about a wages explosion.
When I lay claim to our need for a high wage economy, I do not suggest that we should take off the lid and let everything rip. However, we have to accept that we still have too many low wage earners. Some three or four million of our people earn below £18 or £19 a week. We must get rid of the lower wage levels and move into a higher wage economy, and we have to look for a complete reorganisation of our resources.
In the five years under review, we have been able to do it by dealing with and solving our balance of payments problems. In some ways, I feel that we have made too much of a fetish of our balance of payments. However, since we decided on that policy, we have been successful, and we now look forward to the benefits flowing from it. But if we are to have social change in Britain in the 1970s, we must also look at the Whitehall apparatus which handles the economy. The change of thinking for which we have appealed has to come not only from Parliament and the political parties in Parliament but from the Treasury and the other Government Departments. If we really mean what we say about a forward-looking Britain, we have to change our entire structure and not merely tinker with it in successive Budgets. So far as the Budget goes, it pleases my constituents—the low wage earners who are relieved of a modicum of income tax, and the older people who have had some benefit. But "this far and no further" is not good enough. We hope that the

Chancellor will use this as a springboard Budget into a better future.

6.31 p.m.

Mr. John Hall: One of the hallmarks of this debate is the enthusiasm with which the Chancellor has been supported by hon. Members this afternoon. There was one occasion when I feared that there might not be another speaker on the Government side, and I was relieved when the hon. Member for Blyth (Mr. Milne) rose to speak, not only because it would have been unfortunate to give the wrong impression, that the Budget did not have the full support of the Government benches, but also because what he said was interesting, especially his reference to selective employment tax, with much of which I agree, and his remarks about a high wage economy. I also favour a high wage enonomy, provided it is associated with greater productivity and an increase in the gross national product.
I see that the Financial Times today described the Budget as a "non-event" Budget, and I have heard some hon. Members, particularly hon. Members opposite, have even described it, for some reason which I cannot grasp, as a bankers' Budget. There may be some reason for that, but neither of those criticisms is necessarily a criticism of the Budget itself. The Chancellor, rightly, has been praised by hon. Members, on this side as well as in the Press, for exercising a sense of responsibility and producing a sound, if rather dull, Budget. This may be right, against the present background of increasing inflation.
The Chancellor has given very little away—if restoring something to those who earn can correctly be described as "giving away"—but, so far as direct taxation is concerned, not enough has been done to prevent a rise in the real tax burden which follows a failure to change rates. That is a problem which the Chancellor himself recognised when he said:
The continuing rise in incomes and prices means a more than proportionate increase in the yield of income tax—so that the real burden of the tax rises…"—[OFFICIAL REPORT, 14th April, 1970; Vol. 799, c. 1242.]
That is quite right. It is generally recognised, and I am glad that the right hon. Gentleman recognises it, although he did very little to turn that recognition into


a fact which could be welcomed by taxpayers.
The Chancellor is to be congratulated on various grounds. The first one the glowing account he gave of the rescue operation he undertook since taking over the tiller from his nautically-minded predecessor. Incidentally, I thought that he was a little hard, if only by implication, on his predecessor. When one considers his account of the financial strength of the economy now and the applause which he rightly sought for the achievements of the last 12 months or so, one is reminded of what could happen if one were living in a house which, through the incompetence and carelessness of the housekeeper, caught fire. Under those circumstances, one might applaud a new housekeeper who would put the fire out and it would not be until later, after the first relief had worn off, that one realised that one still had only a charred and damaged house in which to live.
The Chancellor is also to be congratulated on his timing. He is now getting the maximum credit for exercising responsibility and not producing what could be described as an Election Budget. He has left his options wide open for a little later in the year, perhaps, when, by use of the regulator or other means, he could get the maximum political credit for introducing measures to give the greatest benefit to his party in the forthcoming General Election.
Finally, the whole House would wish to congratulate the Chancellor on his presentation—not only in his speech, which was a model, as it always is from him—but in the country, in the Press and on television, through the medium, I suppose, of the Press officers attached to the Treasury. To adapt a famous phrase, he made "the mostest of the leastest", and he did it extremely well.
I turn now to one or two of his positive actions—first, the reduction in the rate of import deposits, and, second, the increase in the rate of initial allowance for industrial building. I have always opposed import deposits—I was bitterly opposed to their introduction—especially as they react unfairly on some industries. This system has been and still is a form of interest-free loan to the Government which, at its height, was running at about £500 million or £550 million and which was costing industry between 9 and 10

per cent. in interest, thus adding to industrial costs.
But what is worse is that, at a time when there was great restraint placed upon credit, when bank lending was limited, when it was difficult to raise money, this placed another tremendous burden on the liquidity of companies and slowed down the rate of industrial expansion and expenditure on plant and machinery and buildings, and thus slowed down the general growth of the economy. For that reason, I was a little surprised to hear the Minister say that there was an increase in capital investment in 1969 of 11 per cent. That did not accord with the figures read out in an intervention by my hon. Friend the Member for Horsham (Mr. Hordern). My personal experience in industry tends more to support that intervention—which showed a reduction in expenditure on plant and machinery and, I think, on buildings over the last year—than the Minister's figures.
The reduction in the rate to 30 per cent. is very welcome, but its effect may be lessened because overseas suppliers, who up to now have been carrying a considerable amount of the burden of these deposits, may now feel that they should reduce the extent of the credit which they have been giving firms in this country and that they should expect settlement on more normal commercial terms. I am not sure that we shall get quite the benefit after this reduction which the Chancellor might expect. Overseas suppliers can get very tired of financing our domestic credit control system.
I hope that the strength of our present economic position, in which the Chancellor rightly takes some pride, will make it possible to remove this burden entirely in the near future, especially as it is quite impossible to discern any real effect it has had in checking imports. There have been only guesses so far and, at their best, they have been comparatively low figures. What it has been used for, of course, is an instrument for controlling credit.
The increase in the rate of the initial allowance for industrial building has risen from 15 per cent. to 30 or 40 per cent. depending on where the buildings are. The effect is that, over the life of the building, the owner is no better off.


All that happens is that he can claim his tax relief that much earlier. I suppose that this could encourage a speeding-up of building projects already in the pipeline which have been planned and perhaps started, but increasing wages and costs are providing an equal incentive to complete the work.
Considering the time it takes to design a project—get tenders and go through the procedure of a local authority planning committee and so on, and then build and complete the project—to try to do all that within two years and pay for it before April, 1972 is asking a lot. I therefore doubt whether this concession will have an appreciable effect on industrial building, except, as I have said, to speed up some plans and projects already in the pipeline.
My real interest in this aptly described "one month Budget" is not so much what is in it but what is not in it. Unless there is to be another Budget before the General Election, and that cannot be entirely ruled out, it is difficult to understand why the Chancellor—I am told that he wants to go down in history as a great Chancellor who made a real impact on our economy and the reformation of the taxation system—did not on this occasion give us the benefit of his ideas on the shape of Budgets to come; the sort of reforms he would introduce and changes he would make, not in this Budget, for the reasons he gave, but in future Budgets.
The right hon. Gentleman could have had the credit for thinking up various ideas and laying down the lines of policy which his successor—it will of course be a Tory Chancellor—would be likely to follow. The right hon. Gentleman could have done that without having to face the problems of implementing those suggestions and lines of policy. That could have given him a niche in history, but he missed the opportunity and, unless there is to be another Budget later in the year, he will have missed it for all time.
It is necessary for me to address my remaining remarks to the next Chancellor, who will, I assume, be a Conservative. Undoubtedly the overwhelming problem which will face him will be the discovery of ways to simplify our taxation system; to attempt to implement

Adam Smith's second canon of taxation, which laid down that
The tax which each individual is bound to pay ought to be certain and not arbitrary. The time of payment, the manner of payment, and quantity to be paid, ought all to be clear and plain to the contributor, and to every other person.
We have come a long way from that definition of what taxation should be.
Apart from income tax and surtax, which have not been made much less complicated by this year's concessions, there are many taxes of appalling complexity of which betterment levy and capital gains tax are only two examples. My first request to the next Tory Chancellor is for him to undertake a far-reaching reform of the taxation system on a long-term programme so that the inland revenue officials will not be overburdened by such changes. They will obviously need some years to absorb them all.
My next request to the next Chancellor is that the tax reforms should include the abolition of National Insurance contributions in their present form. This form of taxation is a poll tax which I dislike extremely. It hits most heavily at the lowest paid, those least able to bear it, and thus makes it difficult to vary. The fact that the word "insurance" is included in it is misleading. It is just another tax which should either be merged with the income tax system or covered through, for example, a payroll tax or—I would prefer this alternative—dealt with through the introduction of a negative income tax system. Problems would be involved if a negative income tax system were introduced, but a government spokesman said recently that he would not rule out its introduction. He said that we would have to wait until computerisation became more advanced before such a system could be undertaken. That may be so. I hope that we will move towards it.
I urge the next Chancellor to make a drastic reduction in, or better still, completely abolish the present restrictions on direct overseas investment. They are damaging to the economy, particularly in the long run, and the arguments for removing them put by the C.B.I. and others seem overwhelming.
I hope that the next Chancellor will have a look at S.E.T., which has been


reviewed only partially by Professor Reddaway and the case against which has not yet been disproved. I hope that the next Chancellor will remove it altogether, remembering that the Conservative Party is pledged so to do. In any event, a full-blooded reform of the tax system would make it unnecessary. If we must keep any form of unemployment tax, it would be better to convert it into a payroll tax; and the Chancellor mentioned something of this kind in his speech. The present tax should be swept away along with the other clutter of ingenious, irritating and damaging taxes.
The regional employment premium was an unfortunate allowance to introduce, because if one wanted to do anything for development areas the money should have been spent on improving roads, harbours and the general amenities of those areas rather than by giving grants for every employee in the area. Most of these grants have gone to the various companies already on site without a single job having been added to the area.
A review of the tax system should envisage a progressive form of income tax which would incorporate surtax. I hope that the next Chancellor—I admit that on our side previous Chancellors have been rather chicken-livered about this—will be prepared to see the introduction of separate assessments for husbands and wives, perhaps with a taxation system of the kind operated by the United States, Germany or Sweden, a country which is frequently held up as being ideally democratic. Or perhaps we could have the French type of system which has the family units system.
On the question of company profits, I hope that the next Chancellor will do away with double taxation which now exists and which stems from the fallacy of believing that a company and its shareholders are two separate entities. They are nothing of the kind and double taxation should be removed.
I could say a great deal about capital gains, because I have concerned myself with this issue from the time when capital gains tax was introduced. I will only comment that when we first debated this form of taxation I suggested rather timidly that it might place a considerable burden on surveyors, valuers and inland revenue officials. On that occasion, I was shot down in flames by the then Chan-

cellor of the Exchequer whose background and experience of these matters is much greater than mine. Indeed, he said that I was talking nonsense.
In the event, capital gains tax has created a great many problems. It has proved very complicated and innumerable difficulties have arisen for the Inland Revenue staff. I hope that if this form of taxation is not abolished it will be greatly simplified, bearing in mind that it is no longer a capital gains tax but a capital tax. The operation of inflation means that the tax as it now works taxes real capital and not capital gain.
The principal task of the next Chancellor, as of the Government, will be to safeguard the value of money, to encourage savings, and to remove disincentives so that people save more. A lot of lip service is paid to this issue, and occasionally something useful is done, such as in the last Budget, when we welcomed the introduction of S.A.Y.E. However, one still finds increasing reluctance to save, as recent figures have shown, mainly because inflation is proceeding so rapidly that nobody believes that the savings put away today will be worth anything like their face value when they come to be used. It can be disastrous for any nation if that feeling becomes widely established.
Take the example of an estate duty. Despite the "slice" rate changes introduced in the last Budget, estate duty is still penal in its effect. There is no reason why the starting point, instead of £10,000, should not be up to £25,000, or even more. By the time the average middle ranking executive has calculated the present value of his house and furniture and perhaps one or two small items of jewellery and a few shares returning a very modest dividend income, one rapidly reaches £25,000, on which he has to pay about £4,000. That might require his widow to sell the house and certainly to sell the shares. It does not seem that with present values £25,000 is too high a figure at which to pitch the starting point for estate duty.
I would go further and suggest that where a wife or husband leaves an estate in whole or in part in trust for the surviving beneficiary no estate duty should be paid until that beneficiary dies. That would overcome the problem for many


medium size and small estates in which a widow or widower is left in difficult circumstances having to liquidate assets he or she can ill afford to lose to meet the penal rate of tax.
Above all, as has been stressed, the Government must introduce measures to stop soaring wage demands in excess of the increases they give to the national wealth and greater productivity. My view is that over the next year or two we shall see a continuation of the present round of wage demands. That will be caused partly by the pent up demands which were choked back during the period of wage restraint and partly by the general upsurge of demand for an ever-improving standard of living, encouraged possibly as the hon. Member for Lewisham, West (Mr. Dickens) said in his interesting speech, by advertising which persuades people to buy more and more things without which the good life, it is said, is not perfect. All these things persuade people to ask for more and more money. That is understandable. We all want more. I have no objection to that and I should like to see people earning more wages which were really worth something. It is absolutely useless for them to earn more if this is not reflected in increased national production.
Unless this is possible, the old, the retired, the disabled and sick, those with no great pressure groups behind them and with no opportunity of adding to their income, find themselves increasingly in difficulties and sometimes in a tragic situation. We cannot allow this to happen. Nor can we allow savings to be destroyed by inflation so that we destroy the will to save.
There is nothing in this Budget designed to deal with the problem of inflation and by that failure the budget will be judged.

6.54 p.m.

Mr. Ted Leadbitter: The difficulty about the debate at this stage is to think of something new that might be said, and said with some purpose. The Front Bench spokesmen are well briefed and back-bench hon. Members who sit through the debate pick up points here and there, but what new thing can be said?
I should have liked to have heard an announcement in the Budget Statement to make clear that it was the last. The annual Budget debate has now reached the point of being full of hocus-pocus and political mystique which has nothing to do with modern problems and modern solutions. It is feudal and not in accordance with the seventies—

Mr. T. L. Iremonger: rose—

Mr. Leadbitter: Will the hon. Member wait until I have finished my sentence? I am pleased that my remarks have brought one hon. Member to his feet straight away. The Budget day statement is not in accordance with the seventies and cannot do for the economy what can be done by other instruments at the right time during the course of the year.

Mr. Iremonger: I should like to have a definition of "hocus-pocus". I have never been quite sure what it means, but I do know what humbug means.

Mr. Leadbitter: I usually use it to describe the performance of the Tory Party.

Mr. Iremonger: The hon. Member is saying that he does not quite know what the words mean?

Mr. Leadbitter: I mean that the Tory Party will not accept the truth about this performance.
The hon. Member for Wycombe (Mr. John Hall) was reasonable in his approach to the problem of the Budget statement, except on one count. His performance was certainly better than that of the Leader of the Opposition, whose reaction was to call this a "one-month Budget". That was because he had not anything substantial to talk about. It was the first thought which came into his head in his anxiety to make a point. The hon. Member for Wycombe was fair, except when he tried to draw an analogy with the purpose expressed in the Budget statement. He said that the situation was like that of a house on fire. He referred to cheers from hon. Members on this side of the House, and the implication was, what have they to cheer about? If we put a fire out, that is something to cheer about. The implication is that we started a fire, created a difficulty, and


rushed to put the fire out with buckets of economic water.
If we take another analogy, we may say that when we find a house has its foundations cracked and the fabric is crumbling because of subsidence there is a rebuilding job to do. We succeeded in doing it, and that is something to cheer about. When we came into office we discovered that the house—the nation—had its foundations cracked and the fabric was crumbling to such an extent that there was the worst deficit that we had ever had. So we did the building repair and got a turn round of something like £1,300 million with a surplus of over £500 million.

Mr. John Hall: My analogy was based on the reference which the Chancellor made in his speech to policies he inherited from his predecessor.

Mr. Leadbitter: It is quite legitimate for any Chancellor to do that. The right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) has now left the Chamber. We could refer to the hon. Member's right hon. and learned Friend in the same context. It is part of the normal play in the debate on the Budget to refer to previous Chancellors. That does not alter the fact that when the Government came to office in 1964 they found a record deficit. That cannot be wiped from the books.
The hon. Member for Wycombe referred to The Times. I remind him that in 1964 The Times prophesied that during the course of future years the Tory Party would like to forget about the £800 million and would do something better—it would blame the Labour Party for the deficit.

Mr. Iremonger: The right hon. Member then in charge of the Department of Economic Affairs said this during the March, 1966, General Election campaign:
We cannot claim to have inherited a Tory mess. We cannot come back in 1971 with any such excuse.

Mr. Leadbitter: When we came to office another Chancellor—the right hon. Member for Barnet (Mr. Maudling)—said that the Labour Party had inherited his problems; he also claimed that we had inherited his solutions. We were unhappy about his claim as to solutions. We had to find our own.
Whether hon. Members opposite like it or not, there is now a surplus. If we had had a balance of payments deficit at this stage, as was the case for many years, would hon. Members opposite have pointed their fingers at us and said, "You have mucked it up again"? At a time when there is a surplus, when the economy is stronger, when the restructuring of industry has gone ahead at a tremendous pace, when the export figures are reaching record levels, and when foreign earnings per head of the population are higher than in any country, including America, why are hon. Members opposite unhappy?
If the Chancellor had announced a give-away Budget yesterday, would we on this side have been accused of electioneering? Because we produce an ordinary, gentle, modified reflationary Budget giving £220 million to the right sections of the community, it still makes hon. Members opposite unhappy. Their wretched unhappiness is the only consistent thing I can remember about them, apart from their horrible performance in office.
Apart from the Leader of the Opposition, who persists in making political mistakes in the House, right hon. and hon. Members opposite often try to cool debates down, because they do not want to be charged with the statements they are prepared to make outside the House. The campaign will go on, with hon. Members opposite trying to impress upon our people, the people who have produced the new Britain, a lack of confidence in the Labour Government and a lack of belief in our performance. They also continue to suggest to our friends abroad—this is worse than anything alse—that the Labour Government are not fit to govern. This is what hon. Members opposite have been doing for many months; and they will continue to do it.
I want to suggest one or two ideas of my own. At this stage, when the balance of payments is so high, when the balance on visible trade is exceptionally good, and as there have been only five years like it in the last 175, I believe there should have been some announcement of the abolition of prescription charges. I think this has been forgotten. I do not mention this purely on the basis of equity and the proper treatment of those in need. The Labour Government have dealt with that problem, in that about


50 per cent. are exempted from paying the charges.
However, many people are still paying who can ill afford to pay. In families where there is more than one illness the costs become high when several prescriptions are required. Worse, if a man is sick and off work, not only must he pay prescription charges unless exempted—but when he signs off he must pay 4s. or 5s. to the doctor—this is a private income for the doctor—for the privilege of being told that he is again healthy. So such a family with a limited income, at a time when its only means of sustenance is through social allowances, pays too much in prescription charges and pays another sum when the man signs off.
The greatest house-building programme Britain has ever known has meant moving many people from the centres of towns. This has the effect that sick people must often travel into the centres of towns to see doctors. Travelling costs, prescription charges, and signing-off fees can become a burden.
Another reason why I should like to see prescription charges abolished is that getting the money in is hard work. It is time-wasting to pharmacists and doctors and for those who must administer the scheme. The country benefits by only about £10 million. Prescription charges could well be abolished.
In any case, prescription charges were introduced only as a package deal. Not long ago I gained the impression that it was desirable that they should be abolished. If this is an omission from the Budget Statement, or if the proper way to abolish them is for the Secretary of State for Social Services to make an announcement, I hope that the Government will take this course, having decided that these charges have become an unnecessary feature of the Health Service and that the sooner they go the better.
Next, I should like to have seen some easement for the building industry. The Government could suitably have made some modification of the selective employment tax. The Chancellor impressed me greatly by his Budget Statement, and in any case I know that the building industry will be greatly helped by the reduction in Bank Rate and by redistribution of disposable incomes. Therefore, the ques-

tion whether we should take the brake off a little more is a matter of opinion.
Everybody has agreed that the construction industry is not a service industry. It is a manufacturing industry—it makes houses. Therefore, it should have been given some relief.
However, these remarks of mine are not to be put into the same class as remarks by hon. Members opposite, who are always alleging that the Labour Government have broken their promises. I remind the House that far more houses have been built in the last five years than were built in the last five years of the Tory Government, namely, over 2 million houses. We have built more houses for private ownership and occupation than were built at any time when the Tories were in power.

Mr. Terence L. Higgins: Perhaps the hon. Gentleman will remind us of the exact promise the Prime Minister made on this subject.

Mr. Leadbitter: I am quite willing to tell my party—as I hope the hon. Member would tell his—that one of the great mistakes in politics is to announce targets in this highly unpredictable world. This is a fact of life, and I wish that politicians would learn that the only real targets that should be reported to the people whom one serves are the ones which are achieved. [Laughter.] The targets which this party achieved are very high and, whether they like it or not, hon. Members opposite cannot take away from this party our record of far more houses—and better ones—than they produced.
In the Northern Region in 1963–64, 13 per cent. Of houses were built to Parker Morris standards. Last year 85 per cent. Were built to Parker Morris standards, and last year also this Government passed a Housing Act which will ensure 100 per cent. Parker Morris standards in future house building. So on performance and on standards our record is clean. [Interruption.] The hon. Member must not get excited. The economic experts on the other side of the House inject so much political prejudice into their theorising. They cannot contain themselves. I wish that the hon. Member would keep himself in a sedentary position until I come to a comma.

Mr. Higgins: I fully appreciate that the hon. Gentleman might wish me to keep in a sedentary position. But would he answer the simple question I asked: what was the Prime Minister's promise on this subject and how has the record compared?

Mr. Leadbitter: As the hon. Gentleman knows very well, I am not prepared to speak on behalf of any other hon. Member. I am here to speak for myself—the hon. Member for the Hartlepools. My constituency is as good as the constituency in which the Prime Minister lives and works excellently for his constituents.

Mr. Paul B. Rose: Before my hon. Friend leaves that point, would he put in that context that there are many local authorities—not least my own in Manchester—where the Conservative local authority has deliberately slashed the housing programme planned by the Labour party previously?

Mr. Leadbitter: This is one of the most shocking stories, and it must be made public. I know how my hon. Friends feel about it. In the good old northern part of England, I expect even Tories to be made of at least reasonableness if not common sense? But what did they do at Sunderland? They slashed the housing programme and they thought that they could blame us for it. In the language used by hon. Members opposite, this is just not cricket. I shall leave the question of selective employment tax now because I believe I have made the point that we might well have eased the brake just a little more.

Mr. Arthur Probert: Would my hon. Friend not agree that we are not so much concerned with what the Tories promise as with what they do not say? I have in mind, if my hon. Friend will remember it, the notorious Rent Act to which the Tories made no reference in the previous election campaign?

Mr. Leadbitter: I am pleased that my hon. Friend has said that, because I know Wales so well and I know that that profound observation will not have gone unnoticed.
There is something else which the Opposition have forgotten to do. I have not heard very much about the value-added tax this week, and I should like an explanation. Being a simple, ordinary hon. Member, I feel that I am entitled,

even if the public are denied it, some explanation about what the Opposition mean by it and when they will introduce it. [An HON. MEMBER: "Do not be arrogant."] When are they going to issue some details about it? I withdraw one of those statements—the one about when they are to introduce it—because they will not have a chance for a very long time.
I refer to two other matters. First, some sort of work study should be applied to the possibility of seeing how best we can produce some element of incentive in respect of overtime which is something which is taxing the minds of many people. It is all right for chaps like me who are involved in this House—and other hon. Members will accept this—because we put the time in from choice. We work long hours, but that is how it works out in this remarkable and wonderful place. But what about workers outside who must work 60 hours a week and more to earn a living? They cannot understand why they should be taxed so much on what they call overtime. I know that there are bound to be difficulties, but if my right hon. Friend would consider the advisability of examining how best to have some modified or selective treatment here to reduce the income tax rates on overtime, I am sure that there are a great many working people who would welcome that gesture.
The same applies to tax relief on travel. During the war, we had some tax relief on travelling. It was principally accepted because the Government then said, "You go there, Great Britain needs you."Today we are restructuring the whole of our industry. Computerisation of our industrial, commercial and even political lives is going on at such a tremendous rate that what we are really saying to our people is "Go there", or, conversely, in the development areas we are saying "Industry, come here."We are changing people's lives tremendously in this revolution of building new houses, new schools and new hospitals and, mark you, building new roads and providing factories. Therefore, travelling time becomes a pertinent part of a man's life. I want to see some tax relief introduced on travelling time. Again I am aware that there are great complexities, but again it is a matter worth studying.
I have mentioned the development areas. I hope that the party opposite


will bear in mind that people like myself will charge them in every part of the development areas of the Unied Kingdom with a responsibility to give a firm undertaking that they will not tinker with the financial support that has brought new life to those areas. More than once, the Leader of the Opposition has made it clear what will happen. He has made it clear that the amounts of money being spent to attract new industries is not his kettle of fish. I come from a constituency where we had the highest unemployment figures in the United Kingdom in 1963–64 with 12½ per cent. out of work. It was not by itself an isolated case. There are many constituencies in Wales, where I lived, with a tragic story which is worth repeating time and time again and will still be new and will still be a warning to hon. Members opposite.
We shall fight every hour of the day and every day of the week as long as the Leader of the Opposition persists in his attitude of getting back, as it were, to market forces. Make no mistake about it. In this situation there is no difference between the philosophy of the right hon. Member for Wolverhampton, South-West (Mr. Powell) and that of the Leader of the Opposition. At this stage, we are introducing in the Northern Region about £300 million reconstruction work, inducements to industry and the building of new roads. The party opposite must not tamper with it. If it does, it will do so at its peril.
Over 2 million people have now been taken out of the income tax scale, and we must view that fact against the perspective of our national position today. Whether hon. Members opposite like it or not—and all their trickery with debating points does not matter a tinker's cuss—the country has a healthy economy, and a balance of payments the like of which we have not seen for decades. Our invisible and visible trade is an example to the world. The restructuring of industry has proceeded apace and is continuing, and there is a fine momentum for change for the better. We have a better people today, a more enlightened people and a more creative younger generation. Against the background of this great revolution and change for the better, I am very glad to know that 2 million have

had that little bit of help because they need it most.
One of the problems in an advancing society is that change, although it can benefit, can temporarily hurt some people. This humane Government, therefore, have given that bit of help to those who need it, and that quite apart from all the peripheral advantages which have not been and could not be covered in the Budget, redundancy payments, social security payments, and all the help and consideration we are giving to widows and to women.
That brings me to a point which, although in parenthesis, is another fine testimony to my party's record. It has been working on, and will shortly report on, its proposals to remove, so far as we possibly can, all discrimination against women.
Against that background, the Opposition offer us nothing but a confession of their own confusion. They just do not know how to play the band. I know that they would have preferred this week a bad balance of payments and unemployment as near 900,000 as it was during the closing period of their years of office. They would have liked that so that they could put on shining armour and present themselves, as they so often have, falsely but unblushingly to the electorate, offering the false prospectus which on this occasion has already been nicely prepared after the caviar at Selsdon Park.
I am proud of the Government I support, proud that they have built this house where the foundations were cracked and the fabric trembling, damage done by a party which, after 13 years, could find neither the solutions nor the will to rebuild. We have had five short years. We want more years to keep the momentum up. Great Britain will be the poorer if the crafty and cunning Tories again present their prospectus for another period of dismal unfortunate policies, policies not geared in the slightest to the needs of the people but only for the benefit of the privileged. This is something else to be borne in mind. We on this side do not think in terms of privilege. We think in terms of people.

7.23 p.m.

Mr. Peter Hordern: I had not realised that one of the attributes of the hon. Gentleman the Member for The


Hartlepools (Mr. Leadbitter) was an ability to rebuild the Palace of West-minister after it was damaged in the war. I take it that that is what we are to understand from his talk of rebuilding this House. Whatever the hon. Gentleman's merit in that respect, he has a remarkable facility for making a long speech at short notice. One of his hon. Friend's spoke of the Budget as a springboard. I do not know what hon. Gentlemen opposite think it is a springboard for, but, plainly, they cannot think that it will be a springboard for the election, for if they had they would have turned up in rather greater numbers. The difficulty facing the Government Whps at the moment is that those hon. Members who have turned up are likely to be critical of the Government.

Mr. Rose: Nonsense.

Mr. Hordern: The party opposite is in continuing trouble now, whether it be over the Budget, the Education Bill in Standing Committee, or the Government's general handling or mishandling of their affairs.
I am glad that the Chancellor showed no false sense of modesty about the change in our affairs. We had from him a full and helpful statement. We have had a tale of heroic recovery from a desperate position, a position brought about by lamentable misconduct of the economy, a misconduct of the economy which resulted in short-term debts at the end of 1968 of no less than £3,363 million, over four times as much as the so-called deficit which the Government say they inherited in 1964. Even now, the short-term debt position is twice as bad as in 1964. We have suffered the defeat of devaluation, as a result of which we suffered an immediate direct cost of £426 million, and a further loss of £356 million, being the loss on forward contracts entered into by the Bank of England. We have suffered the liquidation of our entire dollar portfolio to the tune of about £445 million.
Thus, apart from the short-term indebtedness, every penny of which was created by the present Government, we have lost about £1,227 million, all of which has been consumed in the flames of the Government's scorched earth policy.
The Chancellor has not told us the whole story. He might have reminded us of the siege economy which we have had to endure in the past few years, of the £50 travel allowance limit, and the import deposit scheme which is still being retained.
It is true that we have a record surplus, but at what a fearful cost in higher taxation and wasted resources in manpower and lack of investment for the future both at home and abroad.
In his Budget speech last year, the Chancellor said:
It is to the surplus countries of the European Economic Community that the world must look now for the main impetus to continued trade expansion. The correction of deficits cannot be achieved without some balancing reduction of surpluses."—[OFFICIAL REPORT, 14th April, 1969; Vol. 781, c. 993.]
For the life of me, I cannot see how the Chancellor can square that statement with his announcement about import deposits yesterday. There is a small reduction, but import deposits are still maintained in spite of what he said a year ago.
What is the position regarding voluntary restraint on overseas investment? This is still being maintained, and all the time our position in the growth economies of the world, notably Australia, is being overtaken by our competitors, especially the Americans and the Japanese. This restriction, too, is a heavy price which the country has to pay.
There is one move which the Chancellor could have taken now, namely, to drop the surrender of 25 per cent, of the dollar premium on sales of overseas securities. This regulation has only the effect of diminishing the dollar pool and. therefore, increasing the dollar premium. I put it to the Chief Secretary that the fact of a dollar premium at 29 per cent, is still a bad advertisement for sterling.
The Chancellor has not told us about the strains which have been imposed upon us in extra taxation, in continuing high interest rates, the record number of bankruptcies, and the decline in National Savings.

Mr. Rose: We have repeatedly heard from the Opposition this reference to a magical figure of National Savings. Does not the hon. Gentleman know that most people with any idea of finance put their


money now into local authority investments, other forms of bond, building societies, and the rest? Will he give the figures for those together with National Savings so as to give a fair picture instead of a distortion—or does he not know the figures?

Mr. Hordern: I am somewhat acquainted with these figures. I would only point out to the hon. Gentleman, whose contributions to our finance debates I have not yet had the pleasure of hearing, that perhaps the Government would not share the nonchalance he appears to show about the decline of National Savings. I merely adduced it as one of the trends in a very sad story.
It seems that the Chancellor has been a little coy about the movement of hot money. It is just conceivable that he sees before him the awful prospect, having climbed out of the Slough of Despond, that the Valley of Despair is now ahead of him. The problem of hot money is that it can be switched from one financial centre to another by just a very short series of telephone calls. It is by no means certain, if the United States economy shows real signs of recovery, that the funds that have recently come to the United Kingdom in such welcome profusion will necessarily remain.
The flow of funds will also depend on the evidence that emerges on our own economy, and particularly whether the Budget matches the evidence or not. So we should consider the evidence, and all the evidence is of mounting inflation. The Chancellor said last year:
Had earnings been more restrained during 1968 this Budget could have been an easier one. The nation cannot have it both ways.
The plain fact is that the nation has had it both ways. It has had an easier Budget and an increase in the level of earnings—up by 7 per cent. last year.
What about the prospects for 1970? What kind of lead have the Government given? They have shown about as much resistance to wage demands in the public sector as Annie in "Annie Get Your Gun"showed reluctance for firearms. Talking about Annie, she reminds me of the Secretary of State for Employment and Productivity, not just in her fiery temperament but in her inability to say "No", not that she would not say "No",

but just that she could not. The gas industry, railways, steel, the Post Office—none of them showed increases of less than 10 per cent., and many showed a great deal more.
So what has the statutory prices and incomes policy proved? If it has shown anything it is that the delaying effect it may have had has been swamped by the massive and pent-up increases now occurring. This policy has been a serious irritant in the Government's relations with the trade unions and has caused wages to go up faster than they would otherwise have done, simply because the bargaining power, and thus the authority, of the union leaders has been seriously weakened.
The Chancellor had something to say on wage increases last year. He said about the policy for industrial relations:
In particular we need to facilitate the smooth working of the process of collective bargaining in industry and to help to prevent the occurrence of unnecessary and damaging disputes, of which we have seen all too much recently, and which are totally incompatible with our economic objectives. The Government have, therefore, decided to implement without delay, during the present Session, some of the more important provisions incorporated in the White Paper, In Place of Strife'."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781. c. 1000–6.]
I wonder what "totally incompatible" means. Not so much, apparently, that the Chancellor was not prepared to slip off the fence on the wrong side when the chips were down in the Cabinet when this point came up. So there is to be no reform of the trade unions by the present Government.
No claim is too far-fetched. The Government have given the clearest evidence that they are prepared to pay any price to buy industrial peace, and industry has no choice but to follow. What was once described as "totally incompatible" has now become total surrender.
There are several interesting, not to say unique, features of the present economic situation. First, how can companies which have suffered such a credit squeeze afford to pay such vast wage increases? Second, what will happen to our competitive position if prices continue to rise as rapidly as they are now doing? Third, how is it that there is so much money about anyway?
In answer to the first question, I think that companies can afford the increases


in two ways—first, by being very chary about the number of extra people they employ, and, second, by not investing as much as they should in new plant and machinery. I do not see unemployment coming down very much, and although productivity is likely to show a big increase production is unlikely to rise very fast. The latest figures show that in real terms, at 1963 prices, investment in new plant and machinery was less in 1969 than it was in either 1967 or 1968. Both the C.B.I. survey and the more recent Financial Times survey show that the majority of companies propose to spend less on new plant and machinery this year. This is not surprising. There is no other way in which companies can pay the various increases in costs they have to sustain except by cutting down on labour, or new investment. This is the most alarming part of our economic situation, that we already invest too small a proportion of our gross national product compared with our competitors, and now it looks as though even this small proportion will be reduced still further.
This is not all, because the physical increase in stocks and work in progress was only half as much as it was in 1964, and substantially less than in 1965. Therefore, if home demand picks up, as everyone expects and hopes, it is all too likely that imports will rise during the remainder of this year. So it seems that our balance of trade and payments position is likely to deteriorate.
The Prime Minister claims that there is no evidence that our exports are becoming uncompetitive. The trouble here is that the official statistics are so out of date. But the Financial Times, in a most helpful inquiry among economic officials in the countries concerned, showed that the annual increase in earnings in France, Germany, Italy and the United Kingdom was between 11 and 14 per cent. whereas the increase in hourly output in manufacturing was only 4·3 per cent. in the United Kingdom against 7·2 per cent. in Italy, 6·9 per cent. in France and 6·1 per cent. in West Germany. Such evidence as there is, therefore, is firmly that we are rapidly losing the competitive position we gained as a result of devaluation, so the outlook for the rest of this year is not as good as it appears.
The Chancellor has added £220 million to purchasing power, which means that the only weapon being employed to contain inflation is the monetary weapon. I am a great supporter of the Chicago school, but it is asking a great deal of the monetary weapon if it is used alone. It is asking a great deal more if it is not even used properly. There were many of us who thought that to restrict the increase in domestic credit expansion to £400 million would make credit conditions extremely difficult.
There is no doubt that that is what the I.M.F. intended them to be, and that it set a target which appeared extremely tough compared with the previous year. Hair-raising stories went around from those who claimed to be close to Mr. Milton Friedman's thinking about the time-lag effect, and how this would be at its most powerful during the taxpaying season at the beginning of this year. The Treasury, that ark of the neo-Keynsians, found itself launched into a hostile sea in a new and rudderless ship which it did not think would float anyway. The Bank of England, finding some difficulty in distinguishing between Marty Feldman and Milton Friedman, and rather suspecting that its leg was being pulled, just let it be known that it would continue to manage the gilt-edged market, which it knew more about than any gentleman from Chicago.
This was a highly interesting situation. Nobody could have guessed what would happen, but everybody expected something to happen. Nobody guessed that d.c.e., a weapon of severe monetary restraint, would prove to be so little troublesome. It is true that credit has been very tight, but it has always been possible to obtain credit at a price. Treading as warily as I may over this very uncertain ground, I believe that the truth is that when we are in a position of external surplus d.c.e. is not an effective way of measuring credit movement. Indeed, it is designed to discount any increase in the money supply caused by the inflow of funds from abroad. The real increase in the money supply, seasonally adjusted, in the four quarters to the end of December, was about £462 million—well above the permitted increase in d.c.e. My guess is that the first quarter this year will show a further increase. What is certain is that the banks have


not been critically short of money. That is why they were 5½ per cent. over their lending ceiling in March. D.c.e. becomes a weapon of duress only in conditions of external deficit. The classical theory is that the money supply automatically contracts in such circumstances. But that is not allowed to happen, because we either run down our reserve or we borrow from abroad. These borrowings are assessed in d.c.e. in conditions of external deficit and the level of d.c.e. in these circumstances is of real moment. It seems to me to be a case of "Heads you win," in the case of an external surplus and, "Tails you win, up to the level that you set yourself", in the case of an external deficit.
It is nice to know that we can at least set our own limit again and do not find it being set for us by the I.M.F. But d.c.e. will become of considerable importance during the next few months. That argument was strengthened by the Chancellor's statement yesterday that the money supply increase could be less than the increase in d.c.e. This squares with the prediction that our balance of trade may not be favourable later in the year.
As this is almost certain to be the last Budget statement that the Chancellor will make I had hoped that his tax reforms would have been more geared to the real structural weaknesses in the economy. He took two-and-a-half hours to say what could have been said in two-and-a-half minutes.
We should ask ourselves why our rate of growth is lower than that of any other country in Europe. It has not been clearly established that there is a precise correlation between investment and growth, but as a proportion of the g.n.p. the gross fixed asset formation is 18·2 per cent. in the United Kingdom, 22·9 per cent. in France, 23·1 per cent. in Germany, and 34 per cent. in Japan. It is true that the United States is lower at 16·6, but the fixed asset formation per head in the United States is more than twice what it is here.
If we take the savings of households as a percentage of disposable incomes, which is at least deferred expenditure, we find that we are again at the bottom of the league, at 5·2 per cent., with France the nearest to us in Europe at

8·6 per cent., and Italy at 15 per cent. Personal savings increased during the 13 glorious years by 17·4 per cent., whereas between 1964 and 1968 they declined by 0·8 per cent. So if the Chancellor were to take an entirely objective view, his priorities should have been to relieve poverty by increasing social security benefits, to reduce the taxation of company and of individuals where the scope for saving is greatest. That would have meant a substantial reduction in surtax, for the yield of surtax is only £240 million, and the greater part of any reduction would have been saved.

Mr. Derek Page: I shall be grateful if the hon. Member will give the figures in terms of percentage of g.n.p. invested during the 13 years of Conservative Government, as compared with the last five years.

Mr. Hordern: The proportion of g.n.p. invested in new plant and machinery?

Mr. Page: Yes, on the same basis as the hon. Member quoted earlier, just a few sentences ago. He gave a comparison between this country and other countries. I believe that he said that it was 18·2 per cent. for Britain. What was it during those 13 glorious years?

Mr. Horden: I am not making a party point. I do not know what the figures are.

Mr. J. Bruce-Gardyne: I can help my hon. Friend. My hon. Friend the Member for Guildford (Mr. David Howell) received a reply on precisely that point the other day and it showed that the rate of increase in fixed manufacturing investment in the glorious 13 years amounted to 2 per cent. per annum of g.n.p., whereas in the last five years it has been 0·5 per cent.

Mr. Page: That does not answer my question.

Mr. Iremonger: I should not press it.

Mr. Hordern: I am grateful to my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne). As always, his intervention was extremely helpful. In this context, it is interesting to see that the Tax Reform Act, 1969, in the United States provided for a maximum tax rate


of 50 per cent, on earned incomes by 1971. This seems to me to be the best and plainest incentive that there could be. At one stroke it would remove much of the necessity for share options, fringe benefits, and all the time and labour that people spend on reducing their liability to tax. Nothing could be more stultifying than the present exorbitant rates. They force people to adopt all kind of strategems, if they do not actually force them abroad.
Listening to the Budgets of this Government is not listening to the amount of revenue that is to be raised, or how it is to be done, but to a whole series of penal measures, aimed at high earnings. Capital gains tax, close company legislation and the treatment of trust income are all designed in the name of social justice but are in reality a pursuit of social warfare. If the Government had spent half the time they have on clobbering individuals and messing about with industry, and if industry had had to spend only half the time it has in filling in forms, we should have had no growth problem to worry about.
What is perhaps even more disturbing is that the Government spend so much time on penalising people that they do not get on with their responsibility, the relief of poverty. It is all very well to take more people out of the tax net—although they are the same people who were taken out just a year ago and find themselves back in again—but what we should be concerned with is the number of people who pay no tax at all. There have been several helpful reviews about the state of the poor. One of the most striking was produced by the London School of Economics—Hilary Land's survey of London families—which showed that with families of five or more children, 25 per cent. are living below the official poverty line.
It seems to me that this sort of statistic makes it essential for the Government to set up a proper inquiry into the merits of a negative income tax. This has been talked about a good deal in the United States, and I cannot think of any more appropriate measure than to set up a Royal Commission to study this method. It would at least be a practical way of seeing whether specific help could be given, and in the most direct way.
The test of a Budget should surely be whether, as a result of the changes proposed, we are confident that those who form the weakest elements in our society have been strengthened, that inflation has been held in check, that skill and hard work is properly rewarded, that companies as well as individuals feel free to take risks, and that their lives are not bedevilled by Government interference. This Budget falls a long way short of this test, just as this Government fall a long way short of what the country needs. It is time they went.

7.48 p.m.

Mr. Paul B. Rose: The hon. Member for Horsham (Mr. Hordern), who sat down in a morass of statistics, made one comment, at least, which is correct, namely, that he had not noticed that I had previously taken part in debates of a financial character. Equally, I could point out that I had never noticed him in a Home Office or foreign affairs debate, or a debate on social security or transport—or, indeed, at all. I earnestly invite him to take part in those debates. I can assure him that I shall not take exception to his interventions. His intervention would have been only too welcome in the debate in which I spoke last week, on Northern Ireland—an area in which the Conservative Government have singularly failed to tackle the economic problems, to the extent that in one town I visited there 29 per cent. of the male population was unemployed. It does not become the hon. Member to comment adversely on the fact that I do not normally take part in debates of this type.
My reason for taking part is that I was so impressed. If he would speak to my wife, who was with me this morning when I was preparing the remarks I would make for the debate, she would confirm that I was here, waiting to speak, from the outset of the debate, and was called away for an hour. I hope that the hon. Gentleman will withdraw any imputation that he made in that regard.
My right hon. Friend the Chief Secretary is only too well aware that my reason for speaking today is that all too often one tends of necessity to speak in a critical manner of one's own party, because this is the rôle of a back bencher


—one sits quietly while one's Government gets on with the job when one is not critical—and for once we have a Chancellor of the Exchequer who has proved himself, when he was at the Ministry of Aviation, and particularly as Home Secretary, and now as Chancellor, as not only the most able man in the House, but as a man with the greatest integrity and grasp of affairs.
I should like to say something about the Shadow Chancellor, the right hon. Member for Enfield. West (Mr. Iain Macleod). At the end of his speech, he quoted a number of figures which at first appeared impressive, but which were taken entirely out of context. The context was that of a Government which had inherited a £800 million deficit and turned into a £600 surplus, a turnover of £1,400 million on the balance of payments. To take those figures out of their context as the right hon. Gentleman did was, to say the least, not exactly honest.
The hon. Member for Horsham dealt with the problem of the poor. The poor were certainly with us when I fought my election campaign and came to the House in 1964. I am not saying that they are not still with us, but I remember at that time fighting on the issue of pensions and making my maiden speech five and a half years ago on that subject, and I know that in real terms the pensioners are now 20 per cent. better off, and for that reason alone those five and a half years have been worth while. Another section of the community who have received a 20 per cent. increase recently has been the nurses.
The criticism of the Budget has been that on one side we have had a few prophets of gloom who have talked about caution, while on the other side there have been those who talked about a wages spiral and who have accused the Chancellor of allowing some sort of galloping inflation, who say that the incomes policy lies in ruins. Perhaps it does, but on those ruins there is not only a strong foundation, but a strong structure, and the economy is stronger than the country has known it for many years. The prescription offered by the right hon. Member for Enfield, West was a prescription of clamping down once again on the public sector, denying the nurses their 20 per cent., denying the teachers their £120,

using the public sector once again as the whipping boy while the wages of those in industry surge ahead.
The hon. Member for Horsham gave a recipe for industrial chaos. Perhaps he did not hear "The World at One" today. I advise him to listen to it more often.

Mr. Roy Roebuck: A Left-wing programme!

Mr. Rose: The fact that I have appeared on it six times during the last year does not suggest that it is necessarily a Left-wing programme.
If the hon. Member had heard it, he would have heard Victor Feather responding to the Chancellor's appeal on television yesterday. That response was positive. The voluntary restraint which the trade union movement has indicated it is willing to impose is of a kind that can and will work as statutory restraint and trade union bashing on the other side will not. We now have a prescription for harmony whereas the Opposition would offer a prescription for industrial chaos and discord if they were ever able to put their policies into practice. I was very encouraged by the ready response of Victor Feather to my right hon. Friend's appeal.
One thing that this side of the House will reject is an attempt once again to depress wages in the public sector, the wages of those often least able to fight, those who like the nurses cannot go on strike, people like the teachers, people like the dustmen and others who do not have the technological grasp which can allow them the leverage required to bring an industry to a halt. The remedy for the wages situation which Opposition spokesmen suggest I could not accept.
There are some of my hon. Friends who display a masochistic gloom because the Chancellor has not doled out enough of what they might regard as bribes for an election. That is to his credit. First, they underrate the overriding obligation of a Chancellor to the economy and well-being of the country. My right hon. Friend has shown by his actions that this consideration was uppermost in his mind. Unlike the pre-election Tory booms, we have had an honest Budget as well as a socially fair Budget.
Some of my hon. Friends who would like the Chancellor to have given away


more are sometimes the very people who have supported industrial workers, already on high rates of income, for claims of increases of £10 a week. This is hypocrisy, because one cannot have it both ways. I think that the Government were right to ask for voluntary restraint among reasonably well paid industrial workers if devaluation was to work through the economy, as it now has. I was among those who were advocating devaluation at least two years before it happened. Although we now have large increases in wages, they have been held back long enough to allow devaluation to take the economy out of a deficit into a remarkable surplus, a surplus which has surpassed even the wildest expectations of those on this side of the House and the Chancellor himself.
What I am most concerned about is the Budget's social justice. May I first deal with some of the more minor items? I am glad to see the end of the Victorian prudery concerned with mothers, often unmarried, with the responsibility for a child, and I welcome the improvement of the help for the aged who go out to work. As we go round our constituencies—and I say this as someone with a father in this category—we find older people often have the energy and ability today to continue working after retirement age. I am delighted that, not for the first time, the Government have been able to raise the limit and to help old people who are earning a reasonable sum and who are useful to the nation and able to help themselves. I believe that much personal happiness comes out of their work.
I am glad that we are to get rid of some of the minor irritants which militate against ordinary people using the banking system and I welcome the action of our estate duty and the tax on casinos.
Above all, in spite of the strictures of the Opposition, I am delighted that 2 million people have been taken out of the income tax band altogether. They are not the people who gain most. Those who gain most will be married couples earning £600 a year or—and this is the more average situation—married couples who have two children and who are earning £800 a year. It is the lower-paid worker with a family who needs help the most. There is a great deal of social justice in the way in which not only were the 2 million removed from paying in-

come tax altogether, but the way in which we have a sliding scale helping at the point of income where help is most needed.

Sir Brandon Rhys Williams: The hon. Gentleman says "at the point where help is needed most", but surely he must recognise that people who need the most help are those who are not in the tax system at all?

Mr. Rose: I will deal with that point later. There is certainly the point about the people living on pensions and the large families. There is a case for doing away with the earned income allowance altogether. I find it difficult to know how two-ninths will be translated into decimal currency. Perhaps it will be approximated to 22½ per cent. I had hoped that the Chancellor might have rounded up to 25 per cent. on this occasion, but no doubt it is a reform which will come later.
There is a general myth abroad that we in this country are somehow over-taxed as compared with other countries. To quote an hon. Gentleman, people are driven abroad. I can only say that the country with the highest taxation in Europe, a country with 21 per cent. direct taxation on households, is Sweden, the richest country in Europe. It is usually the richest countries which have very high rates of taxation to pay for the many social benefits available.
It is not merely because they have less tax on expenditure, because there is a 15·6 per cent. tax on expenditure. The United Kingdom compares very well with other countries. The Netherlands is more highly taxed and, in spite of the quotation from the United States, if their system is looked at carefully it will be seen that there is little difference in direct taxation. Where our taxation system is inequitable and regressive is not in tax but in the amount of contribution that is paid for social security.
I hope that the earnings-related benefits and payments will help here. In France, the employer pays a social security contribution of 12·7 per cent. as against 2·4 per cent. for the employee. Some people who talk about food prices in the Common Market might note that point and some of us might note that there is room for increasing the employers' contributions in this sphere.
To deal with the point raised by the hon. Member for Kensington, South (Sir B. Rhys Williams), the point that I was making is that in dealing with those people who are in receipt of wages we have attacked the problem where it matters most. There is a sliding scale which is socially just. Those outside the tax limits altogether, such as large families and old people, those about whom the various fringe organisations are concerned, have suddenly become a matter of interest to the Opposition.
I never noticed this interest before. It seems that the Child Poverty Action Group, even if it has been at issue with the Government in recent years, has certainly stimulated something entirely new on the Opposition benches. I remember, and it comes to me as I speak, an incident when two right hon. Members of the Opposition Front Bench were hounded out of a meeting of the Bow Group at the Conservative Party conference shouting, "Are not we Conservatives concerned about social welfare?" One was a former spokesman on education and the other a current Front Bench spokesman for an aspect of economic affairs.
It seems that we have a late conversion among hon. Members opposite and there is a sudden interest in the poor, in the large families, family allowances and pensions, an interest never displayed by them during the many years when they had the opportunity to do something. This is not a problem for the Chancellor but my right hon. Friend in charge of social security. It is both unfair and unprincipled of hon. Gentlemen to throw at the Chancellor, who has produced a socially just Budget, the fact that he has not dealt with this sphere, which is not within his area of influence.
I hope that we will continue the policy we have embarked upon whereby we increased family allowances. This was by no means popular. We met with opposition both from this party and on the doorsteps. It did not win votes, but it was a correct and socially just policy, to increase family allowances using the claw-back to see that they went in the right direction. Those who talk of this are talking about something which will be dealt with in non-budgetary measures.
A certain amount of caution injected into the Budget speech and the Budget

allows for this, and I welcome it. We have the use of the regulator and the possibility of increased credit and other measures in months to come if our expectations are exceeded, if the Chancellor's naturally careful forecasts are as careful as they were last year—in other words, if things go better than we fear but as well as we hope.
Haste in injecting too much into the economy now could lead to measzures later which, apart from their unpopularity, would be retrograde. The Chancellor has just about got it right. There may well be room later, particularly in view of the co-operative attitude of Mr. Victor Feather today, for a shot in the arm later in the year. The trend in the balance of payments the very day of the Budget indicates that this may be possible. The fact that we are able to reduce Bank Rate by 1 percent. Over a short period and yet sterling is doing so well is another encouraging factor. I do not believe that we should rush into expansion well above 3½ per cent., as some of my hon. Friends suggest. We are wise to be cautious, particularly after previous examples of an inflationary spiral followed by a balance of payments crisis.
Because we have trodden the road to success carefully, by treading carefully in a socially just Budget, there will be further opportunities in the year for further injections in the new economy. Unlike one of my hon. Friends, I do not believe that a Budget, in the complex situation of any highly industrialised nation, is the be-all and end-all in some mystical way for a year. The Government have been right to assess and reassess the situation. There is much to be said for taking away the mystique and some of the antiquated traditions of the Budget, not least the top hat.
I have something to say which might be regarded as a criticism of what I would otherwise think of as a lily-white Budget. I do not regard S.E.T. as an infamous tax; I think that it is an excellent tax. I think it might have been raised in certain respects to provide for higher tax concessions at the other end of the scale. While the Budget is absolutely sound from a social point of view and absolutely just, there is another matter which must come next in our lists of priorities after dealing with the very poor and that is the question of incentive. I am sure that


time and again my hon. Friends will have heard skilled and unskilled manual workers in their constituencies say, "I have worked many hours overtime this week, but 8s. 3d. in the £ has been taken out of my wage packet", although they are wrong about the 8s. 3d. because of the two-ninths allowance. It is not what is true which counts so much as what is thought to be true. There is a psychological aspect to this matter.
Having tackled these priorities and the problem of poverty, the next problem is that of incentive. Some people have been disappointed that there was not a cut in the standard rate of income tax. The only way in which that could have been done would have been by increasing selective employment tax, although exempting certain sectors. My criticism of S.E.T. concerns not the form of taxation but the lack of selectivity. I am delighted that theatre productions have been exempted. But why only theatre productions?
As a former Chairman of the North West Sports Council, I must declare an interest. I am concerned about the effect of selective employment tax on a number of voluntary sporting clubs which have suffered as a result of a gaming tax on machines which bring in a large amount of their income. [Interruption.] If the hon. Member would get on his feet to intervene instead of sitting down with his feet in the air I might be able to hear him.

Mr. Bruce-Gardyne: I imagined that the hon. Gentleman was referring to one-armed bandits, and I thought that he might have said so.

Mr. Rose: There may be a lot of one-armed bandits sitting on the benches opposite. If the hon. Gentleman wishes me to use the vernacular, I will refer to gaming machines. I do not see that there is any great difference in terminology. Some voluntary clubs which provide recreation of a sporting nature have suffered in two ways, not merely one way. The arts need special attention, but there is a tendency for Governments always to rate the arts higher than sport, for certain snob reasons. The two should go hand in hand as part of a recreational pattern, and some of the help given to the arts should be mirrored in help given to voluntary amateur sport as against professional sport. I do not see the relevance of the intervention of the hon.
Member for South Angus (Mr. Bruce-Gardyne) about one-armed bandits.
The Budget is sound evidence of the Government's positive management of the economy, not only because of the remarkable balance of payments surplus which has been announced, but because of the manner in which available resources have been disposed of. However, there are still pockets of unemployment of an unacceptably high level. I do not think that the industrial building programme, excellent as it is in directing building in the grey and development areas and in giving a fillip to the building industry, will alone deal with those pockets of unemployment.
I remember an election remark, not a promise, of five years ago about publicly controlled industries being injected into development areas. The Government should think again about this matter in a wider context, particularly in connection with engineering and machine tools. The present unemployment is very different from unemployment as the generation before mine knew it. Much of it is short term. The long-term unemployment to which reference has been made tends to be in areas, usually mining areas, where older people have retired from an industry in which they have worked all their working lives and where there is a special problem which is well nigh insoluble.
Much of the unemployment is of a very brief nature and is cushioned by the generous benefits which the Government have given, and it is even more cushioned by redundancy payments. More than one constituent of mine has opted for unemployment rather than stay on for an extra year in an industry which he regarded as declining because of redundancy payments and the chance to be retrained to enable him to enter another industry. There is, however, no reason for complacency about the unemployment level. There should not be the exaggeration and emotive attitude to this problem which was perhaps apparent some years ago.
My right hon. Friend's actions have relaxed the economy as much as we could expect. No Chancellor of the Exchequer should put all his eggs in one fragile economic basket. I am glad that my right hon. Friend resisted what might be a tempting electoral option in this respect. If he erred on the side of caution, it


could well be remedied. If he erred on the other side, it could be disastrous. One cannot find fault with what has emerged in the package, even if it appears to be unsensational and unimaginative. The purpose of Chancellors of the Exchequer is not to be sensational and imaginative but to ensure that the economy is put on an even keel and is going in the right direction and to give the Secretary of State for Social Services the opportunity to relieve problems of poverty.
During the rest of the year there will be room for further manoeuvre. I hope that in the next budget which my right hon. Friend prepares, perhaps after the next election when he is again Chancellor, he will deal with the problem of incentive by tackling the standard rate of income tax. There has been a great deal of mythology, particularly in my party, about direct and indirect taxation. It has been shown that in many ways indirect taxation can be as progressive or regressive as direct taxation.
If I may quote from memory a Fabian pamphlet of two or three years ago, a family with two children with earnings of about £700 a year pays roughly the same proportion of its income in taxation as a family with earnings of £1,400 a year, in spite of our supposedly progressive taxation system. There is a great deal of rethinking to be done about direct and indirect taxation.
I am glad that my right hon. Friend the Chancellor chose to deal with direct taxation this year rather than to start playing round with indirect taxation on various goods. He strove for simplicity, and this is one reason why the Budget is not sensational. The Inland Revenue is overburdened. To increase selective employment tax would give unscrupulous employers and people in service industries the pretext to increase prices out of all proportion and thus recreate the inflationary spiral which we have sought to avoid. If that was my right hon. Friend's motive in resisting the temptation to increase S.E.T., it is a motive which is well understood and is valid in the current situation of steep wage increases.
This is the first time that I have spoken in the House on any financial matter. Matters of finance have not come within my province. However, I am enormously impressed by the Budget as

concrete evidence of sound economic management and of economic progress since my right hon. Friend took over the Chancellorship. It is a sure sign that the Government can, not only manage the economy, but manage it soundly and well and without electioneering as their first priority.
Any Government who have managed to translate a £800 million deficit into a £1,400 million surplus at a time when they have had to face many external factors which have been no fault of their own—such as problems with the deutschmark, Middle East problems and a seamen's strike—and in spite of the difficulty of applying an incomes policy, which I support, but at perhaps the wrong time, merit the confidence of the people. What has been given in this Budget is perhaps only a promise of what is to come.
It has been said that only twice has a Socialist Government given away money in a Budget. I do not know whether there is any moral rectitude in giving away or taking away money. What is more important is the quality and the standard of life which a Government provide for the people. Merely to talk in terms of giving or taking away money from consumer expenditure is a wrong way of looking at the Budget.
However, I believe that the present Government, who recognised the problem of public squalor and private affluence and who did their best to tackle this in their initial four years in concentrating on the public sector, are right on this occasion to concentrate on the private sector in the sense of the private individual with money in his pocket. I believe that this was the right balance and the right thing to do and I hope that this movement will go further in the next Budget.
I should like to take this opportunity, in the first Budget debate in which I have spoken in five and a half years, of congratulating my right hon. Friend the Chancellor on an honest Budget, a socially just Budget and a Budget which, I believe, the nation will come more and more to recognise as the right Budget for 1970.

8.22 p.m.

Mr. J. Bruce-Gardyne: I feel that I owe an apology to the hon. Member for Manchester, Blackley (Mr. Rose). Half an hour or so ago, when


the hon. Member started speaking, I suggested, apparently wrongly, that he had been summoned in at the last moment by the Whips, a remark which the hon. Member would have understood had he witnessed the scene earlier when his hon. Friend the Member for Lewisham, West (Mr. Dickens) said that the debate would be a debate between the Front Benches and the back benches opposite. After the hon. Member had completed his speech, there was only one hon. Member on the back benches opposite ready to participate in this great debate. Thereafter, there was a sudden rush of hon. Members opposite into the Chamber and I thought that the hon. Member for Blackley was one of those. If, however, he was not, I apologise to him.

Mr. Rose: To clarify the situation, may I say that at 5·15 I had to attend a meeting and I came back only in time to have missed, unfortunately, my hon. Friend the Member for Lewisham, West (Mr. Dickens). I am sure that everyone in the House will always be sorry to miss my hon. Friend.

Mr. Bruce-Gardyne: I apologise if I misunderstood the hon. Member's movements.
Anybody who has listened to the Budget debates of the last year or two must be able tonight to recognise that a General Election is imminent, because these debates have usually been remarkable for as much assault upon the Government Front Bench from the benches opposite as the Government Front Bench has received from this side of the House. Today, however, it is a question of all good men having to come to the aid of the party, even if, perhaps, some of them have to be called in from the Tea Room for the purpose.
The best thing from our point of view about the Budget is that unless the Prime Minister is sufficiently irresponsible to wait until he is booted out by the calendar—I certainly would not put it past him—this is, presumably, the last Budget that we shall have from the present Chancellor of the Exchequer. I seem to remember from my schooldays a ditty, the first line of which said something about
This time next year, where shall we be?

The answer, I suppose, for a large number of hon. Members opposite is, "Not in this academy". This is perhaps, therefore, a good opportunity to examine the Budget, particularly in the light of Budgets which have preceded it.
The comments this afternoon by the Financial Secretary were interesting principally for the degree of complacency which, I thought, he showed in his references to manufacturing investment. He painted a picture of manufacturing investment on a rapidly rising trend, whereas he will be aware that there is a great deal of dispute in the evidence between the C.B.I. and the Ministry of Technology on this subject.
The answer to the Financial Secretary was given, as specifically as anything could be, by the reply that my hon. Friend the Member for Guildford (Mr. David Howell) received from the Financial Secretary only a week ago, to which I referred earlier but which is worth reading to the House. My hon. Friend asked the Chancellor of the Exchequer
by how much the rate of industrial gross fixed investment increased as a proportion of gross domestic product between 1951 and 1964, expressed as an annual rate; and what the corresponding figure is for the period between 1964 and the latest available convenient date.
The Financial Secretary's reply was that
Gross domestic fixed capital formation by all industries except dwellings and public services…increased by 2 per cent. a year between 1951 and 1964; between 1964 and 1969…0·2 per cent.—[OFFICIAL REPORT, 7th April, 1970; Vol. 799, c. 45.]
In other words, the rate had fallen to exactly one-tenth. It is difficult to imagine a more shattering indictment than this of the Government benches.
It seems to me that in one sense at least, the Budget is typical of the Chancellor of the Exchequer. He always prefers to leave it to his luckless colleagues to announce the more embarrassing things—the increase in postal charges and in insurance stamps. Then, he had the brass nerve to tell us that the Budget does not put up any prices while he himself drags in any goodies he can such as the cut of one-half of one per cent. in Bank Rate, which does not normally feature in the Budget Statement.
Before we say a thankful farewell to the present Treasury team, we should spare a thought for the Chief Secretary,


who, I am sory to see, has now left us. It has always seemed to me that the sole objective of economic policy in the eyes of the Chief Secretary is the prevention of tax avoidance. While he was as happy as a sandfly plugging any loopholes he could find in the tax structure, he utterly neglected any attempt to control the money supply as being apparently beneath his notice.
The Chancellor reminded us yesterday that last year he had
stressed that fiscal and monetary policy would both be more effective if each was working in harmony with the other.
He added:
The last 12 months have demonstrated that this is so.
I think that many of us, on either side, would agree with that.
What the Chancellor failed to recall was that only 20 minutes before he rose to open last year's Budget, his right hon. Friend the Chief Secretary had blandly told me, in answer to a Question, that the rise in the money supply in 1968—when fiscal and monetary policies were only too flagrantly marching in opposite directions—had been nothing to worry about because it was only two-thirds of the rise in the money supply in 1967, rather as if he might have said to us, "It is all right, I beat my wife only three times a week nowadays."
For my money, in the light of that, the most interesting sentence in the Chancellor's speech yesterday is contained in column 1232, when he said that
money supply could well rise by less than d.c.e. this year."—[OFFICIAL REPORT, 14th April, 1970; Vol. 799, c. 1221, 1232.]
I am sure my hon. Friend the Member for Worthing (Mr. Higgins) will correct me if I am wrong, but my understanding is that the implication must be that, just as the money supply has expanded this year, notwithstanding the contraction of d.c.e., because of capital inflow from overseas, so in the year ahead money supply will increase by less than d.c.e., because the Chancellor of the Exchequer is anticipating a capital outflow. If this is so, there could, I suppose, be two possible explanations. One is a turn-round in the basic balance of payments, a turn-round in an adverse direction, leading to what might be described as a

genuine outflow. The other explanation is the possibility that the opinion polls might begin to suggest that the party opposite would win the election. If this situation were to materialise, anyone in his senses would start getting money out of this country as fast as possible.
I have no doubt that hon. Gentlemen opposite, including those on the Treasury Front Bench, are by now aware that the Chancellor of the Exchequer's ability to control such a situation is, in reality, very limited. I believe that the Chancellor of the Exchequer is far too rational a human being to imagine for one moment the second possibility, that of a turn-round in the opinion polls. I do not think there is any danger of that, and he must know that there is not. So we are left with the somewhat uncomfortable feeling that he and his advisers are at least fearful of a turn-round in the basic balance of payments situation.
This impression is reinforced when one compares the speech of the Chancellor of the Exchequer in the Common Market debate with what he said yesterday. On 25th February he made a completely and unreservedly confident speech about the outlook for the balance of payments in which his message was that, rather like a squirrel, he would hoard his nuts for presentation to the European Community, but that he expected that the supply of nuts would grow very considerably. It was a much more reserved and uncertain prospect which he held out to us yesterday.
I may be over-pessimistic in my interpretation of what I read as the Chancellor's nuances, and, equally, the Chancellor's nuances themselves may be over-pessimistic. It is important to emphasise that, if for any reason there were a substantial outflow across the balance of payments, the fulfilment of the £900 million target of the Chancellor of the Exchequer for d.c.e. in the coming year could necessitate the application of further restraints internally, notwithstanding the condition of the economy at that time. Any hon. Gentlemen who were inclined to rub their hands when the Chancellor of the Exchequer rather ostentatiously announced that he was renewing the regulator should bear in mind this possibility.
I have no doubt that many of us will have read Mr. Sam Brittan's article in the Financial Times this morning. It is only fair to say that Mr. Sam Britton is an economic guru to many of us on both sides of the House. He refers to the clash between the rapid rise in money incomes and the stringency of control in money supply. He said:
With incomes increasing about three times as fast as the money supply, an interesting situation will develop. In the short term, the velocity of circulation not only can but is likely to, increase.… But there are limits to the process; and if rapidly rising wages collide with a slowly moving money supply, something will have to give some-where. Either unemployment will be increased, and there will be larger incomes per head for fewer people, or the monetary guidelines will give way.
His conclusion was:
The final result is likely to be a bit of both.

Mr. Dan Jones: On a point of order. Could we prevail upon the hon. Member to deal with the Budget and not so much with speculation about the future?

Mr. Deputy Speaker (Mr. Harry Gourlay): The hon. Gentleman is quite in order.

Mr. Bruce-Gardyne: I must confess, with respect to the hon. Gentleman, that I thought the purpose of the Budget and of the Chancellor of the Exchequer's financial judgment was to try to foresee what was the likelihood for the economy in the coming year, and I cannot imagine anything more relevant than this.
I want to say a brief word on the subject of S.E.T. I found the Chancellor of the Exchequer's references to the Reddaway Report yesterday extremely disingenuous. He claimed that Reddaway had said that S.E.T., possibly associated with the progressive ending of R.P.M. has led to an appreciable increase in productivity. What Reddaway was really saying was that it is quite impossible to distinguish S.E.T. effects from R.P.M. effects. It is obvious to the meanest intelligence that any achievements in fostering productivity which may be attributable to the S.E.T. effect would certainly not have occurred without the abolition of R.P.M., which was viewed with scepticism, not to say hostility, by the Chancellor of the Exchequer and his friends when my right hon. Friend the

Leader of the Opposition introduced it in the last Conservative Government.
The other conclusion to be drawn from Reddaway is that if Reddaway's estimates of the effect of S.E.T. in inducing higher productivity in the service trades have any validity, the selective element should disappear and the tax should be applied all round, including the manufacturing industry. I have always held that S.E.T. as at present administered has two absolutely unacceptable features. The first is the absurd discrimination between service and manufacturing industries. The second is the poll tax arrangement which, as the Chancellor of the Exchequer recognised yesterday, penalises industries with below average wage structures, and makes no economic sense.
I welcome the change forecast by the Chancellor of the Exchequer from a poll tax basis to a payroll basis. I had hoped that we should go further than this and completely scrap the tax as it stands and replace it with a payroll tax which could be differentiated on a regional basis. I have always believed that we could use that as the key element in our regional development policies. If we were prepared to do that, we could scrap the whole cumbrous, ruinously expensive and inefficient system of investment grants, investment incentives plus R.E.P. and the rest which, on balance, have had the effect only of encouraging capital intensive industries to undertake investments that they would probably have undertaken anyway and, as the hon. Member for Middlesbrough, West (Dr. Bray) has pointed out on occasion, inducing investment which has actually reduced employment in the development areas. I hope, having taken the first stage in the transformation of S.E.T. into a payroll tax, we shall now take the further stage of abolishing the selective element in it and putting it on to a regionally differentiated basis.
Generally speaking, the Budget has been treated both in the newspapers and elsewhere with the respect it deserves. As my right hon. Friend the Leader of the Opposition pointed out yesterday, the key phrase in the Budget speech was the Chancellor's admission, so evidently imposed on him against his will, against all his inclinations, by his Treasury advisers and rushed through as fast as he could get through it, that incomes


cannot for long continue to rise at their recent rate. The Chancellor has no ideas how to slow down the rate of increase. If he had any ideas of doing so at this stage, the Prime Minister would not for one moment allow him to apply them. He has decided to shut his eyes, to hold on tight and hope that the election will come before the crash. In short, I believe that this is not a Budget. It is a deed of abdication.

8.40 p.m.

Mr. Dan Jones: I will not follow the hon. Member for South Angus (Mr. Bruce-Gardyne) in his remarks. It is my intention to speak directly about the Budget.
I sat yesterday for two hours and twenty minutes fascinated by the discourse of the Chancellor of the Exchequer.

Mr. Bruce-Gardyne: The hon. Gentleman must be the only one.

Mr. Jones: I strained every nerve to follow the complexities of his Budget. I am certain that a Chancellor of the Exchequer who in a matter of a few years has succeeded in transforming the biggest deficit into the biggest surplus deserves the admiration of all those who have some regard for the economic solvency of our country. 
It might be said, "We expect that sort of statement from you since you are a supporter of the Labour Government". And indeed I am an unashamed supporter of this Government. At this point I would add that a few years ago The Times carried on a campaign whose aim was to turn out this Government and to put in their place some form of despotic bureaucracy which would have consisted chiefly of businessmen. We all remember that period. Indeed, some of our colleagues who were in this House were nominated as part of that proposed Government.

The Minister of State, Treasury (Mr. William Rodgers): Lord Robens was among them.

Mr. Jones: My colleague reminds me that Lord Robens was named. The Times, which carried on that campaign for a period of time when this nation's economy was in the doldrums, has this to say about the Chancellor today:

Mr. Jenkins has the reputation of being both a responsible and a clever Chancellor. Yesterday's Budget will do more to enhance his reputation for responsibility than for cleverness. The Labour Party will be able to obtain a certain negative satisfaction from having a Chancellor who was not prepared to produce a political budget. The country certainly ought to feel gratitude for a Chancellor who has presided over the largest improvement ever recorded in the balance of payments and has followed it with a Budget of perfect economic propriety.
This is the newspaper which two and a half years ago wanted to bring down the Government and put in their place some despotic managers, quite forgetful of the fact that in the process of doing so a highly responsible journal of this character was at the same time torpedoing our democratic standards. [Interruption.] Hon. Members laugh if they want to, but this is absolutely true. They are laughing at their own ignorance.
I was thoroughly disappointed at the reaction of the Leader of the Opposition yesterday. I like to treat my political opponents with respect. I do not see how democracy can survive unless we practice this political characteristic. I know that all hon. Members on the other side of the House have not begun to understand that fact, otherwise they would not jeer as they have when some hon. Members have shown more indignation than expertise on this subject. They should not do it. They should have more sense.
Let me return to the Leader of the Opposition. We heard from him a tirade against the Chancellor for not bashing the unions, as though that was his responsibility. What an effort from the man who pretends that he has a right to that very important office at No. 10 Downing Street. That was his contribution.
I sat on the benches opposite for a number of years. I have heard Tory Chancellors presenting their Budgets, and I have heard my right hon. Friend the present Prime Minister analyse Budgets in a better way than the Tory Chancellors who presented them. That is the kind of responsibility which belongs to those who accept Ministerial appointments. In my view, the Opposition performance was not only a contrast but a very disappointing one. One must reckon with the possibilities, whatever one's feelings may be, that he will occupy No.


10 Downing Street, though I hope profoundly for reasons not connected with the Labour Party that he will not succeed.
I feel that this Budget should commend itself to those who have the economic well-being of our nation at heart and who possess a Christian attitude to our people. I have said already that Chancellor Jenkins has transformed the biggest deficit into the biggest surplus. In addition, he has taken some 2 million people out of income tax entirely and brought a tremendous amount of relief to a large number of widows who, by force of circumstances alone, are compelled to work. In my constituency, there are a large number of people of that description who have worked in cotton mills for upwards of 40 years. For a long time they have been telling me how very tired they are, having had the kind of industrial life that they have. They complain to me that their industrial efforts are penalised by the burden of taxation. I am convinced that every one of them will give a sincere vote of thanks to the Chancellor of the Exchequer for the action that he proposes.
My right hon. Friend made the challenging statement that no prices should rise as a result of this Budget. That again is a matter of great substance. In my opinion, this Government have never had the kind of gratitude from the nation that they deserve for their efforts to control prices. For the first time in our history, we have had a National Board for Prices and Incomes set up under the chairmanship of a Tory, albeit a very constructive individual. Notwithstanding that, it has to be admitted that prices have risen and, quite wrongly, it is thought in the country that the Government have the complete power to prevent price increases. We who operate in this more cloistered atmosphere know that that is quite wrong, and that Governments do not have that power. But this Government took that power in an effort to prevent price increases, and they deserved to succeed much more than they have done.
However, Chancellor Jenkins has certainly—

Mr. Kenneth Baker: Order, order.

Mr. Jones: If the Opposition pre-fer it, the Chancellor of the Exchequer has done all that he can to prevent increases in prices. He has done much to encourage capital investment in industry, something which we will desperately need in the years to come. He was right to say that we are on a plateau from which we could slip back. He is wise to encourage capital investment and safeguard our industrial capacity.
He has also ferreted out the tax dodgers, which everyone would surely cheer. Yet one searches the speeches of hon. Members opposite in vain for any reference to it. Surely those who pay taxes are interested in those who consistently dodge them and in the knowledge that Tory Chancellors did nothing to put this right. Yet we wait in vain for any applause from the benches opposite.
My right hon. Friend has been criticised for his caution. This is the usual gambit of the Opposition. They criticised him two years ago when things were bad. Today, when things are immeasurably better, they criticise him for taking steps to see that they will not get worse again. Damn it all—what do these people want? They want power: it is as simple as that. I have been here long enough to remember Tory Chancellors increasing allowances for surtax payers and taking cod liver oil and orange juice from the children.
The Chancellor has said that he has the use of the regulator if we need an added spur. If that became necessary, the Tories would cry that it was for election purposes. Would anyone be wrong to say that the Tories used a false boom when the economy was in a bad state for election purposes? How can they object if a Labour Chancellor used the regulator when the economy was particularly sound? Yet they say at the same time that he has been too cautious. I do not suppose hon. Members opposite will agree or even sympathise with me, but I hope that the people will understand this. It is on their ability to understand that the future of this improvement depends.

8.55 p.m.

Sir Brandon Rhys Williams: Hon. Members generally are expressing some disappointment with the Budget, mainly because the Chancellor has shown an obsession with the balance


of payments to the exclusion of the real health of the economy. In this he is dealing with the symptoms of the economy's health and not with its fundamental condition.
We did not hear any really serious comment from the right hon. Gentleman about the three real problems that exist; investment and the supply of savings; low wages and poverty among families; and incentives. What he said on those subjects was inadequate.
As to savings and investment, hon. Members will aware of that well known description of inflation, as too much money chasing too few goods. The Chancellor has done a great deal to reduce money supply, but he has forgotten to increase the supply of goods at the same time. If he wants to increase the supply of goods, his first consideration must be to promote savings by all possible means.
The right hon. Gentleman has promoted saving by the least desirable means, which is by raising taxation to the point of overkill. Naturally, speaking from the Left, he is more interested in promoting savings by the State than by the private sector. He said with a sense of pride that there would still be an overall surplus of £250 million in the whole of the public sector in the coming year.
It would not be necessary to have that surplus in the public sector if more could have been done to stimulate saving in the private sector; for example, by enabling better benefits to be given for life assurance, by giving more encouragement to contractual savings, particularly in equities, for which the public has a taste—and by giving more to help with house purchase. It is high time that he looked at the tax concessions given to building societies and recognised that more generous concessions to them would be in the interests of the whole of society.
But far and away the best opportunity to increase real saving in the private sector is to stimulate occupational savings. About £800 million of new money comes into the capital account through the occupational savings movement. That figure could easily be made into £1,000 million, and possibly even doubled, if suitable stimulus were given to it.
We have come to recognise that the employer's rôle in the contract of employment includes the provision of deferred pay for retirement. In the past I have suggested that the employer's compulsory contribution for the provision of occupational pensions could be raised to 10 per cent. in exchange for S.E.T. However that may be, we might have had something constructive from the Chancellor on this issue.
The right hon. Gentleman's proposals for reforming the law are to be welcomed, particularly his proposed amendments of the 1952 Act, with all its appalling complexities. The document published by the Inland Revenue is constructive and helpful. But we shall look closely at the Finance Bill, when it is published, to see whether the right hon. Gentleman intends to do something to stimulate the transferability of pension rights and, in particular, we shall look to see if something is to be done to alleviate the impact of the mixed benefits rule.
In connection with low wages and poverty among the families of people at work, hon. Members on both sides were amazed that there was no mention in the Budget of family allowances.
I would certainly welcome an increase in family allowances, because that is the most direct means of getting at the problem of the wage earner whose wages are not enough to keep his family in what we consider decency.

Mr. Dan Jones: What would the hon. Member's party do about it?

Sir R. Rhys Williams: Obviously the hon. Member was not present to hear the extremely forthright and far-seeing speech by my right hon. Friend the Member for Enfield, West (Mr. lain Macleod). I strongly commend it to him. I hope that he will read the speech in HANSARD.
The National Insurance system has been devised to deal with the family where the wage earner is out of work because he is unemployed, sick or retired. We have not bent our thoughts sufficiently to giving help to the family of a man in full-time employment who is not able to earn enough even in a full week's work to keep his family above the level considered by the Supplementary Benefits Commission to be the minimum. Council


housing, of course, is available to a man whether he is unemployed or in work, but it is only a partial solution; state education is also only a partial solution to this problem. Family allowances, introduced by a Conservative Government, are undoubtedly the most immediate and the right way of solving this problem.
The Budget concessions do not reach the lowest paid of all because they do not pay tax anyway. I am told—and I believe the figures have not been challenged—that if family allowances had been raised and tax concessions for children had been reduced to the point where taxpayers on the standard rate were left in the same position after the changes, it would have been possible to give £1 family allowance for the first child and £1 15s. for each of the others. That is an increase for the second and all subsequent children of 15s. or 17s. The cost would have been only about £30 million and such a reform would have caught about 80 per cent. of the quarter of a million children now living below the supplementary benefit level. I hope that before the debate closes we may hear whether or not those figures are correct. If they are correct they show without dispute that this is the way in which child poverty should have been tackled.
On what authority is it so often said that family allowances are unpopular? I am interested in the subject and I frequently speak about it to audiences of all kinds. I have never encountered the wave of hostility which is supposed to be caused when family allowances are raised. If we cannot have higher family allowances, perhaps the Government can give us more facts to show the reason why. The Family Expenditure Survey refers to too small a number of households considering the size of the problem. It is highly desirable—and would be of the greatest interest to hon. Members on both sides of the House who study these subjects—for the Government to initiate a serious survey to ascertain much more fully the attitudes of the public and where the real needs are.
On incentives, it is not just the marginal rates of tax as ascertained in the stereotyped tables of income tax which are important. We have to look as a whole at the aggregate marginal tax rates,

taking into account loss of benefit as well as the direct loss through income tax. A number of hon. Members have read with the greatest interest the pamphlet by Professor Prest recently published on this subject in which he produced some striking tables. They showed that this is an urgent problem which should be tackled at once, particularly in the area in which a man is earning about £15 or £20 a week. What the Chancellor has done seems to have been in complete ignorance of this problem, because abolishing the reduced rate of income tax on the lower earnings makes the position worse. The Inland Revenue should take more seriously the subject of radical tax reform. It would then find that the solution to its problems of overwork are in its own hands. They are rather like the people who went on tediously making alkali by the le Blanc process rather than investigate the Solvay process by which it could have been made much more easily and cheaply. They were too busy, so they went on doing their job in the old-fashioned way.
Finally, I will say a few words on behalf of surtax payers.

Mr. Roebuck: Hear, hear.

Sir B. Rhys Williams: I do not know whether the hon. Member was present when I spoke on this subject in last year's debate. I was not ashamed of mentioning surtax then and I am not now. The implication of very high surtax rates is that society does more than the individual in the creation of wealth at the upper margins. This is philosophically completely untenable. The reason we have surtax at the present rates is not that it is morally right, but as a relic of the class war.
I know that people will say that it is wrong that there should be plenty in the midst of poverty, but that argument does not stand examination. The poor are not made richer by our making the rich poorer. Surtax yields under 5 per cent. of the yield of direct taxes on personal income. Therefore, the loss of surtax revenue in terms of the whole Budget would be a relatively quite minor matter. The bulk of the money remitted would come back to society, either in the form of savings or in the form of reduced dissaving. I think also that if surtax were reduced, the revenue from income tax


would sharply increase in compensation. I should like to see surtax reduced so that no one would have to pay more than a marginal rate of 50 per cent. on his earnings.
It would be in the interests of the economy if the Chancellor were to consider that suggestion. I realise that he probably will not. Nevertheless, everyone would gain and no one would lose. What we wanted from this Budget was an economic new look for the 1970s. All that we had was a message from the I.M.F. to its British subjects.

9.06 p.m.

Mr. Terence L Higgins: I intervene at this point in the debate, not to wind it up, but, rather, to act in the rôle of chorus and to commentate on how the protagonists have done, or are doing, in the argument
In that respect, I am delighted to have the opportunity of welcoming a new protagonist to the fight, namely, my hon. Friend the Member for Bridgwater (Mr. Tom King), and, if I may presume to do so, to congratulate him on a splendid maiden speech which embodied many of the virtues which the House holds in great respect. My hon. Friend spoke with a light touch and with considerable humour. At the same time he brought to the attention of the House the very real and varied problems which his constituency faces—those of industry and agriculture, those of the young and of the old; problems which are typical of many areas, as my hon. Friend pointed out. We greatly enjoyed listening to my hon. Friend and look forward to hearing him on future occasions.
I was glad that the hon. Member for Lewisham, West (Mr. Dickens) added his congratulations to my hon. Friend, though that was the only remark in the hon. Gentleman's speech with which I agreed. None the less, the hon. Gentleman made a series of interesting remarks and expressed a point of view which represents a particular part of the House's opinion which all of us recognise as interesting, even though we may disagree with it.
What I want to do is to try to put the Budget into a longer term perspective. In doing this, I shall inevitably make partisan points and, I hope, a number of

analytical ones. I have been chided in the past by the right hon. Member for Sheffield, Hillsborough (Mr. Darling) for making my speeches rather like sandwiches in this respect, but it is not something I should worry about; because there are a considerable number of partisan points which reflect the considerable gulf between the two sides of the House in economic affairs.
One of these was clearly made by my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne), when he said that the Chancellor has a propensity for ensuring that all the unfavourable parts of Government policy are taken out of the Budget and put elsewhere and that all the more favourable parts are incorporated in his Budget speech.
This occurred last year in the matter of pensions provisions. The increase was announced by the Chancellor, but he left it to his right hon. Friend the Secretary of State for Social Services to announce the cost of the proposals. This year we find that both the increase in the National Health Service charges and, as my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) pointed out, the telephone charges, are not included in the Budget, but the reduction in the interest rate is included, although there is, as far as I know, no precedent for a Chancellor announcing such a change in his Budget speech.
This was definitely a shop-front Budget speech, a speech designed, at a time when public interest was at its greatest, to create the most favourable possible impression, although, as I have said, the facts of the case are not as favourable as the Chancellor tried to make out. The other interesting point is that I understand that it is likely that the hon. Member for Ashfield (Mr. Marquand) will catch your eye later, Mr. Deputy Speaker. We shall certainly listen to what he says with interest. But this means that there is one character in the drama who is notable by her absence this afternoon. It is not so much a question of Hamlet without the Prince of Denmark, because that would require the absence of the Chancellor, but more a question of Hamlet without the Queen, because the right hon. Lady, the First Secretary of State for Employment and Productivity, who played such a prominent part in our debates last year, is not here.
It is worth referring to that because it is the crux of the matter. Whereas last year we found that prices and incomes and the Government's proposals for trade union law reform were the centrepiece of the whole affair, this year they have been swept under the carpet and as slight a mention as possible has been made of them by the other side of the House. I quote from the Chancellor's speech last year when he said:
The Government have, therefore, decided to implement without delay, during the present session, some of the more important provisions incorporated in the White Paper 'In Place of Strife'."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1006.]
We all know what is now in place of strife. It is complete and utter capitulation over those proposals. This inevitably colours the entire picture in our discussion of the Chancellor's specific proposals. I shall refer to them and the question of the prices and incomes policy in a little more detail later.
Perhaps I may make one final partisan point—and again I make no apology for it—that is that we must look at this Budget against the background of the present Prime Minister's Government and to recall the promise which has frequently been recalled, but none the worse for that, that the Government would implement their proposals without any general increase in taxation in the life of the Parliament. Therefore, if the promise had been kept, in relation to the standard rate of income tax, surtax and the associated rates, the Government would have had to cut the rate by more than one half, reducing the standard rate of income tax to 4s. That indicates what a shortfall there has been between their promise and their actual achievement.
Now the balance of payments situation. Again, to put it in perspective, I was sorry to hear a number of speeches on the other side of the House which really came down to a remarkably low level, even going back to the hoary old chestnut about the balance of payments which the present Government inherited. This has become a myth which it is not necessary any longer to dismiss. We have done it on many occasions and analysed the figure in great detail, as the Chief Secretary will know. But there is one point which ought to be made. If we look back to the Budget Statement in April, 1967, and the pro-

posal of the former Chancellor, who is now the Home Secretary, one notices an extraordinary sense of dejà vu. For example, he said:
In the growing inter-relationships that exist between modern States, the simple knowledge that Britain is paying her way again earns us greater attention for our views and policies. Even more important, it gives us more freedom of manoeuvre …
He ended with a splendid peroration:
We are back on course. The ship is picking up speed. The economy is moving. Every seaman knows that the command at such a moment, is Steady as she goes'."—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 974 and 1010.]
This underlines the point which is really worth making, which is that at that moment clearly the Government announced in the most categorical terms that all the problems were over. So everything that has gone wrong since must lie on the present Government. This came out in the Chancellor's speech yesterday when he went to considerable lengths to say what a job he had had to tidy up the mess which was left to him by his predecessor.
I want to look at the balance of payments against that background and I stress as strongly as I can that I am second to none in welcoming the improvement which has taken place.
In fact, there is still considerable cause for concern. I refer here to the passage in the Chancellor's speech yesterday, when he sought to give the impression that the Government had achieved both a balance of payments surplus and a rapid rate of economic growth. Referring to his fiscal and monetary measures, he said:
It has produced a decisive switch of resources in the direction that was needed, and with a growth performance that compares well with previous periods of balance of payments improvement—even though the improvement was on those occasions much more limited.—[OFFICIAL REPORT, 14th April, 1970; Vol. 799, c. 1214.]
He takes a rather strange selection of dates, comparing the middle two quarters of 1967, which, he says, avoids the dock strikes, with the last two quarters of 1969, the latest six-month period, he says, for which figures of national income and examination are available, and he then seeks to demonstrate that during this period the present Government have achieved both economic growth and at


the same time a balance of payments surplus.
To see the matter properly, let us divide that period and the relevant figures into its two equal parts, as near as we can, which means that we take fifteen-month period from the middle two quarters of 1967 to the end of 1968, and a second period covering 1969. In the first period—roughly 55½per cent. of the whole time—70 per cent. of the overall improvement in the gross domestic product took place, but the balance of payments improvement was only 2 per cent. of the total; while in the second period—roughly 45½per cent. of the whole time—the g.d.p. improvement was only 30 per cent., of the total; but 98 per cent. of the balance of payments improvement took place then. In other words, in the first 15 months there was 70 per cent. of the growth and 2 per cent. of the balance of payments improvement, and in the second there was 30 per cent. of the growth and 98 per cent. balance of payments improvement.
Thus we have had either growth and virtually no improvement in the balance of payments, or little growth but a substantial improvement in the current balance in the two consecutive periods. It is not true that we have both an improvement in the balance of payments and rapid economic growth at the same time. What is worrying about the situation, analysed in that way, is that we can see that, if we do have an increased rate of economic growth again, we shall be likely to have a deterioration in the balance of payments. The way in which the Chancellor analysed the picture, therefore, was not so illuminating as an analysis of its component parts broken down in the way I have suggested.
The situation is all the more worrying, given that there is likely to have been a considerable erosion on the cost side, to which I shall refer in a moment. In a way, the real thermometer is provided by the import deposits scheme. It is extraordinary that the Chancellor should have created a state of affairs, in which the scheme is only slightly modified, with another reduction of only 10 per cent., which, clearly, will cause the maximum amount of irritation to our E.F.T.A. partners and others, because the Chancellor put the weight of his argument in

favour of monetary restraint rather than the need of the balance of payments. I fail to understand why the right hon. Gentleman should continue with this measure if he is as confident about the balance of payments as he maintains.

The Chief Secretary to the Treasury (Mr. John Diamond): I know that the hon. Gentleman is anxious not to mislead the House. He has spoken of a reduction of 10 per cent. in the import deposits scheme. He means a reduction of 10 percentage points, or a reduction of 25 per cent.

Mr. Higgins: The right hon. Gentleman is quite right; it has been going down from 50 to 40 per cent., and now down to 30. I am sorry if I phrased the point inaccurately. At all events, it is likely that this will lead to a further deterioration in our international relations, at a time when the Chancellor himself says that he is confident about the balance of payments.
Finally on this question, I refer to the repayment of debt. There is genuine concern here. Yesterday—this is c. 1220—the Chancellor said that he did not believe that the money inflow was "hot" money. He emphasised that the vast bulk of it was the unwinding of leads and lags. But the danger is that one can unwind to the point where one is actually increasing the leads and lags the other way, and this makes it look as though the position is improving. It leads to an amount of money which could be used for debt repayment, but it is hot money in the sense that the movement can go the other way at very short notice as regards the leads and lags. Therefore, I thought that the Chancellor was extraordinarily optimistic in saying that he hoped in some way that this was not hot money. It is in contrast with the views expressed by the former Financial Secretary, now Paymaster-General, in a remarkable speech some time ago in which he emphasised the very real dangers of relying on hot money and using it in the way in which the Government now appear to be using it.
So, on the balance of payments side, without in any way saying that we do not welcome the change, I feel that there is grave concern for the future. The real point at issue is the way in which the balance of payments surplus has been


achieved only at tremendous cost in terms of our other objectives. This came out very clearly in a series of Written Answers by the Financial Secretary and others on 24th March. If we look at the Answers in terms of what has happened, for example, to gross domestic product, and compare the rate of growth achieved by the present Government with that achieved between 1959 and 1964, it is clear that the balance of payments surplus has been achieved only at considerable cost in economic growth. This is even more clear from, for example, the figures for personal disposable income after tax, where remarkable figures are revealed, and the comparison is very unfavourable to the present Government.
My right hon. Friend has already stressed the cost in unemployment and inflation. That being so, it is very important to look at the present situation in prices and incomes. In the period of 13 years of Conservative Government we were balancing on a knife-edge between unemployment and inflation. Whilst it is true that it was sometimes necessary to deflate somewhat because of inflation and sometimes to reflate because the unemployment level was rising, the overall performance over the period was much better than we have seen under the present Government.
The crucial question we must answer during this Budget debate is, "What is the position when we have a Government who have created an unprecedentedly high level of unemployment and still fail to stop a very rapid increase in wages and prices?" I was deeply disappointed that in the Chancellor's speech yesterday we had no serious attempt to analyse that problem, which is clearly at the very heart of our economic affairs today. The Chancellor, who had previously been on record as saying that if money incomes go up too fast we must tax away the difference, slid over this as rapidly as he could in the House yesterday by saying that it had been necessary for him to have, he asserted, a tougher Budget than would have otherwise been necessary because of the increase in wage claims. But the emphasis on television was much more stringent. He tried to slide over the question more rapidly in the House than on television.
I want to look at the figures. The argument the Chancellor put forward, in for

example, January, 1968, was that if the wage increase is too big we must tax away the difference, or tax proportionately, to stop prices going up. He told us yesterday that the Budget was tougher than it would have been, but he could still give away £200 million. I entirely agree with the view of my right hon. Friend the Member for Enfield, West that a Budget judgment within considerable margins in these circumstances is meaningless. But if wages are going up, as seems to be generally expected, by about 10 per cent. this year the increase in purchasing power is about £2,700 million.
That being so, if the Chancellor taxes away the difference he does not have to tax away the total amount, because much of that extra income will be taken away in increased tax receipts. But if he wanted to stop prices going up he would have to take a very stringent line. It is significant that he has not even attempted to analyse this problem. He has automatically assumed, implicitly, that it will all come out in terms of higher prices. That is what he expects. In that respect he has been less than frank with the House.
I want to analyse the real problem. Whereas under previous Governments we found that if we deflated the economy we created a certain amount of additional unemployment—nothing like what we have now—nonetheless we also stopped price increases. What is the fundamental change that has taken place? In the face of fiscal and monetary measures of unprecedented severity, no serious attempt has been made by the Chancellor to analyse this. We have had a tremendous squeeze and an increase in taxation, but prices and incomes have continued to rise very fast. It is a very difficult problem to analyse.
I have been forced to the conclusion that the situation facing us now is one in which the fiscal and monetary measures have not worked because the Government have failed to take a tough line in the public sector, in respect of both prices and incomes. As a result of this, in order to retain its labour force and to keep pace, private enterprise has been forced to follow suit. The fiscal and monetary measures have not had the effect that the Chancellor might have hoped because the public sector has taken the lead in this inflationary spiral.
I am sure that my right hon. Friend was right to stress—in answer to the question, what would we do—that it is important to take a firm line in the public sector. That does not mean that we would necessarily refuse to grant every increase in wages or prices in the public sector. It means that we have to decide whether or not, in economic terms, a given increase is justified.
If we consider the increase of 11 per cent. in railwaymen's pay, explicitly with no change in productivity, we find it very difficult to see any justification for it. On the other hand, an increase may be justifiable in terms of the recruitment and training of nurses. It is in the public sector that we need to take a firm line. That is probably why the Government's unprecedently tough measures have not had the expected effect.
I do not think that these measures can be said to have been responsible for the switch round in the balance of payments; it is probably the delayed effect of devaluation. These measures have not had the classic impact that one would expect in terms of prices in export markets.

Mr. Joel Barnett: What makes the hon. Member think now that the method of dealing with the situation adopted by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) is likely to be any more successful now than it was unsuccessful then?

Mr. Higgins: The hon. Member should look at the figures which followed that period. That is the essence of the question. It is not a legitimate question for the hon. Member to ask what we would do now. Once we have allowed for the expansion in the public sector we are in the position of pushing someone over the edge of a cliff at tremendous speed and asking him, as he disappears over the edge, "What would you do now?" The consequential wage and price increases are such that we cannot prevent their taking place in the immediately following period.
I next want to refer to the question of forecasting. I was deeply disappointed that the Chancellor rested on his laurels in relation to the publication of forecasts. We have had no improvement in that

respect this year. At the very least we should have had a forecast of the money supply in the relevant terms of what the Chancellor expects to happen with unemployment. I see no reason why that should not be done in our present economic situation.
Secondly, it is high time that we had publication of the forecasts both before the Budget changes and after. The Chancellor is now in a situation in which he makes a statement about financial changes, but gives us no indication of what he expects to be the impact on the economy and aggregate demand. This is a considerable disappointment. The change in the base date in the forecasts in Table 4 from 1958 to 1963 has confused the issue considerably and it would be a great help if on future occasions he were to publish—or, rather, my right hon. Friend were to publish—before and after forecasts so that we may see the true impact of the Budget on the future economy.
It is now generally agreed almost everywhere in the House that we must look with particular attention at the problems of poverty. I do not take the view that the Chancellor can claim, as he sought to do, that his proposals have had a major impact on this problem. In an excellent article last week, the Economist anticipated the kind of change which the Chancellor would make. It referred to alterations at the bottom of the scale. After referring to similar changes last year, it said:
But it is rubbish to say that this fiddling with the allowances is a great social service in favour of the ' most vulnerable section of the community '. Of the 1·1 million people relieved from tax by the device last year only 185,000 were married men; more than four-fifths of the beneficiaries were earning wives (especially part-time earners) and single people (especially teenagers living at home). There is something mean in pretending that a relief which goes so largely to the subvention of pin money and pop-record purchases is a discriminate aid to the poorest people in Britain: the really poor, in their large families or old age non-pensioners' bed-sitting rooms do not pay tax at all.
If on compassionate grounds there is one criticism to be made of the Budget it is that.
But in terms of economic efficiency, the real criticism must be that the comparatively trivial changes which the Chancellor has made diminish the incentive effect of the tax structure. It is not


simply a question of how progressive the tax structure may be if all possible incomes are considered at a given moment of time. The crucial question is how much incentive is given to a person as he himself through time moves up the income scale.
The considerable analyses of the problems for all levels of income were reviewed recently by Professor A. R. Prest in a pamphlet, "Social benefits and tax rates", which particularly stressed the very high marginal tax rates, the implicit marginal tax rates, which might exist and which were bound to have an effect on incentives. The effect of the changes this year is to increase the kinkiness of the tax structure in such a way that the incentive to work harder has been diminished.
Therefore, in principle the Chancellor has been wrongly advised, or, at all events, has produced the wrong proposals. The real answer must be for us to get down the level of direct taxation in a sensible way and to restore incentives in the economy. This can be done only by a radical rethinking of our whole tax and public expenditure structure which the present Government are simply not capable of undertaking. It requires a reversal of the philosophy that the central Government collect as much money as they can from the individual and from industry and the central Government decide whether the individual or industry shall have this or that handed back.
It is this fundamental philosophical judgment which I believe condemns the Government's present proposals and which will be the means by which we on this side of the House, coming back into office, will seek to remedy the problems which face the economy. We are clearly now running up to the General Election. I would make one final point about the promise not to increase taxation over the life of the Parliament. With a total tax bill increase of over £3,000 million, to the debit I suppose of the Chancellor, he has reduced tax by £220 million. We need something more than a dozen Budgets similar to yesterday's between now and the General Election to fulfil the Prime Minister's promise. The electorate, and we on this side of the House, will look forward to seeing whether the Government achieve this desirable and, at this stage, I believe very unlikely, objective.

9.36 p.m.

Mr. David Marquand: It is a great privilege to be admitted to the charmed circle of amateur Chancellors who are allowed to pontificate at the end of the debate and lecture the real Chancellor about what he ought to have done, instead of doing it in the middle of the debate. I believe that the charmed circle has hitherto consisted of my hon. Friends the Members for Ashton-under-Lyne (Mr. Sheldon) and Heywood and Royton (Mr. Barnett) and it is nice—at least for me—to have their mantle descend on my shoulders.
I begin with a point which is appropriately uncontroversial and academic in the rather seminar-like atmosphere which appears to be prevailing at the moment. The hon. Member for Worthing (Mr. Higgins) had one point with which I would agree, perhaps only one, when he commented on the contrast between the extraordinary frankness and openness of my right hon. Friend in relation to publishing forecasts and figures in general and that rather less frank approach which has been taken by the Treasury so far as monetary policy is concerned.
I would take this point a little further than the hon. Member. We are in rather an odd situation in this debate. We are debating not just the Budget proposals of my right hon. Friend but also his economic strategy and the economic strategy of the year which has just ended. In that year it is clear that control of money supply played a much more important part in the total economic strategy of the Government than perhaps ever before, at any rate in post-war history. A new element has been added to the armoury by which the Government seek to control the economy. I am not complaining about that. It was entirely right for the Treasury to embark upon it.
The situation which existed in 1968 was clearly absurd. We had fiscal policy working in one direction and monetary policy in another. That was one of the reasons why the turn-round in the balance of payments did not take place in 1968 but did take place in 1969. However, the fact that this new weapon has been added to the armoury of Government makes it all the more important that this House should have some procedure for scrutinising the way in which the Government use it. There is a sense in


which this debate, concentrated as it is on purely fiscal changes which are now less important as an aspect of total economic strategy, is concerned with something relatively trivial. It is now a matter of major importance to develop new processes so that the Legislature can exert scrutiny over this aspect of Government policy as well. The way do this is to set up a Select Committee on Economic Affairs, able to scruitinise this among other matters. The Treasury gave evidence to the Select Committe on Procedure at the end of last summer on one aspect of this problem. Its evidence was rather unforthcoming and unhelpful. I urge my right hon. Friend to persuade his officials to be more forthcoming when they talk to us this summer. Without this development, parliamentary control of Government economic policy becomes more and more nonsensical. I hope that I carry the House with me in saying that.
The debate has been marked by an extraordinary coyness on the part of the Opposition and an extraordinary absence of any constructive alternative or coherent critique of Government policy. I have listened carefully to almost every speech, and the only thing which has emerged clearly is that the right hon. Member for Enfield, West (Mr. lain Macleod) thinks that the Government should discriminate against employees in the public services as a way of asserting control over wage movements. Does he really think that that would make it possible in the foreseeable future to get back to an effective and credible incomes policy? Does he really think that Mr. Feather would have given the welcome which he did to my right hon. Friend's Budget if we were to discriminate positively against people in the public sector? [Laughter.] This is a serious problem. There is no point in the hon. Member for Worthing laughing.
I have been a consistent supporter of the Government's incomes policy, but the key to an effective incomes policy is that it should be based on social justice. If we deliberately discriminate against employees in the public sector, an incomes policy is impossible—and deservedly so. I therefore find the Opposition's attitude unhelpful.

Mr. Bruce-Gardyne: I agree that this is a serious problem, but the hon. Gentle-

man keeps referring to discrimination. If he has a body of employees and I have a body of employees and he decides a level of wages suitable for his employees but not for mine, surely that does not involve discrimination.

Mr. Marquand: The hon. Gentleman knows perfectly well that what happened persistently and consistently during the so-called glorious 13 years of Tory rule was that the movement of incomes in the public sector got out of line with that in the private sector because the Government deliberately held the public sector back since it was the only sector they could control. That is why it was necessary for my right hon. Friend the Member for Belper (Mr. George Brown) to start with a wholly new approach. He was right. The only way in which we shall ever achieve an acceptable incomes policy is to start along the lines which he proposed. I should like to return to that point later.

Mr. Higgins: The facts simply do not accord with what the hon. Gentleman is saying. However, if he wants a more analytical study, I refer him to the study of Professor Lipsey and others at Essex University which clearly shows that the effect of the policy of the right hon. Member for Belper (Mr. George Brown) and the subsequent statutory enforcement of incomes policy was to accelerate rather than retard the increase in prices and incomes which would take place.

Mr. Marquand: That is not the point that I was making. What the hon. Gentleman says has nothing to do with what I am saying.
I come to the central question of the debate—my right hon. Friend's basic economic strategy. Has he given away too much, too little or the right amount? Is the economy on the right course for growth, or is it too slow or too fast? My view is that my right hon. Friend has done exactly right.
I am sorry that my hon. Friend the Member for Lewisham, West (Mr. Dickens) is not present, because his was the only serious critique of the basic economic strategy of my right hon. Friend. No hon. Member opposite seriously suggested that he has taken too much or too little out of the economy. There was a faint hint of it in the speech


of the hon. Member for Horsham (Mr. Hordern), who slightly implied that we would get into a dangerously inflationary situation and that it was unwise to have made any tax concessions. Most right hon. and hon. Members opposite have, however, been rather too cautious to say that, even if it is what they believe. The only serious critique has been the criticism that the rate of growth at which my right hon. Friend is aiming is too low and that we should go for a much more rapid growth rate.
I should like to take that argument seriously. I have always been a believer in a high rate of growth, and I still am. I believe that the social policies for which this party stands can be achieved only in the context of high and sustained growth. I was one of those who followed the lead of my hon. Friend the Member for Ashton-under-Lyne and others in pressing for devaluation before it happened, because I believed that without it we could never get to high and sustained growth.
I opposed the economic policies of the Treasury before 1967 because I thought that they would not get us on the path to high growth. I believe that they are now on the right course. My right hon. Friend yesterday took pride in the tremendous switch round in the balance of payments. The fact that he has achieved staggering success in the balance of payments is something in which he can rightly take pride. To me, however, that is only part of the achievement. In a way, it is not the most important part.
For my part, having a high balance of payments surplus in itself, if it were purchased at the cost of crippling the domestic economy, would not be worth having. If it were a choice between tremendous balance of payments surpluses stretching into the distant future combined with sluggish growth at home also stretching into the distant future, on the one hand, and failure in the balance of payments combined with rapid growth at home, I would choose the second alternative. If that were the choice, that is the alternative that I should undoubtedly choose.
I have always believed, however, that there is no divine law which states that this country, unique among the countries of Europe, must always choose between growth and a healthy balance of payments and that there is no divine law which states that Italy or Germany can

have a combination of growth and success in the balance of payments but that, for some extraordinary reason, Britain cannot. It has always seemed to me that the real objective of economic policy was to get into a position in which one could combine growth at home with a healthy balance of payments position. Only by getting into that position could one get out of the vicious circle of stop-go, which is the basic reason why the British economy grew too slowly in the past.
We all know what was wrong with the economy from probably the mid-1950s until 1967. Whenever the economy expanded at home, it ran into balance of payment troubles. That forced the Government of the day to bring expansion to a stop. That hit investment and modernisation and led, in turn, to lagging growth and to balance of payment problems when the circle came round again.
The object of devaluation was to get out of that vicious circle. As I saw it, the way that this would be achieved would be twofold. In the past, what Governments have done when they got into balance of payment troubles was to damp down the home economy, to apply the tourniquet and nothing else, in the hope that by making life so miserable for manufacturers in the home market, they would somehow force them to export. That never worked, however, because manufacturers in the home market knew that the deflationary cycle would eventually switch round and we would be back to domestic expansion. Therefore, they took no notice of Governments of the day.
It always seemed to me that it would be necessary not only to rely on the tourniquet, damping down the home economy, but, at the same time, to provide a positive incentive and stimulus to exports by making them more profitable. That, to me, was the real point of devaluation; not just that it made the prices of British exports more competitive, but that it made exports more profitable for the British manufacturer to engage in.
If one could combine devaluation with deflation at home, it would then be possible to achieve a permanent structural shift in the economy. It would be worth while for manufacturers to export and we should eventually get export-led growth instead of consumption-led growth at


home, as in the past. This is what is now happening. It would be foolish to claim that the end of the process has been reached and that we are totally successful already, but I believe that it is now happening.
The hon. Member for Worthing pointed out, quite correctly, that, in the second part of the period discussed by my right hon. Friend, growth at home was rather sluggish and the balance of payments was doing very well. Superficially, it looks rather like the deflationary phase of the cycle that has occurred so often in the past. If one looks deeper, one sees that this is not so. The most important—indeed the only—expansionary force in the economy last year was from exports. The sectors where exports happen were the sectors where growth happened. These were the sectors which showed the highest investment and where unfilled vacancies were highest. There is no doubt that the shift has begun. Exports have become more profitable and manufacturers have started to export because they see that.
The pace has been slow. The British economy is a sluggish beast. Every single act of policy by both Governments over the past 20 years shows that the British economy is extraordinarily slow to respond to anything, but the shift has begun to happen, and that is why my right hon. Friend was right to resist the siren voices of the National Institute and others who suggested that the time had come to porduce a consumption-led boom. That would have smothered the shift into exports just as it was about to be accomplished. That is why I think that my right hon. Friend has taken the right course.

Mr. David Howell: rose—

Mr. Marquand: I had better get on. I have only a few minutes left, and I am not skilled in the art of speaking exactly to the clock. I want to say something about the social strategy of the Budget, and the future outlook it opens up. There has been much discussion about the rights and wrongs of the specific taxation proposals of my right hon. Friend. It was reasonable enough to decide this time to concentrate the help where he did; not on the very poorest, I agree, but on the band just above the very poorest. If one looks at the figures, one can only come to the conclusion that the very poorest

have been protected reasonably well by this Government, but that the section immediately above the very poorest have not been protected quite so well. It was not unreasonable this time to decide to channel help, not to the very poorest, but to the section immediately above it.
What of the future? There has been much discussion about the dangerous movement of incomes and wages, and indeed there have been somewhat exaggerated references to wage explosions and so forth. In the long term one cannot conceivably have a socially just society without the kind of incomes policy which my right hon. Friend the Member for Belper tried manfully and briefly to construct in the early years of this Government and which was then destroyed because it was foolishly used as a method of short-term demand management rather than as a system of long-term social reform. We have somehow to get back to the atmosphere of hope and faith which existed when my right hon. Friend was starting off his work. There is no question that this will be difficult, because a good deal of muddy water has flower under a lot of bridges since then.
How can we get back to that atmosphere? I believe that we can only begin to do so if we attempt to create a longterm incomes policy of the kind which has now been partially offered by the General Secretary of the T.U.C. and combine it with far more progressive taxation and social policies than this Government have so far been able to introduce. Given the economic situation, the Government have done reasonably well up to now. But we now find ourselves at last in a situation where we are not totally constricted by the balance of payments and where we can start to look ahead.
What are the problems that we should try to solve? There are two central problems in a modern industrial society. One is the growing gap between the comfortable majority and a relatively poor minority, which falls further and further behind. One hon. Gentleman mentioned the problem of child poverty. The pioneer study on this subject was carried out by Professor Titmuss some years ago. It showed that the number of people living in poverty had doubled during the 10 years 1953 to 1963. That is what happens in a capitalist society if nothing


is done by the State to redistribute income in favour of the poorest. That is the first priority.
The second priority is to tackle the gap between the majority of society and the small minority which still owns such a vast proportion of the capital wealth which the community helps to create. I believe that only if one makes a radical assault on these two problems, attempting on the one hand to close the gap between the majority and minority and on the other hand attempting to redistribute capital wealth from the small minority of very wealthy people to the community, will an acceptable incomes policy ever be made to work.
Two precise proposals are needed. One is the negative income tax. Many people have spoken about this tax, and I agree with much of what has been said by Opposition speakers on this matter. The other proposal is a wealth tax. It is a pity that my right hon. Friend did not mention this in his speech. I hope that it is not too late for him to saying something about it in the course of this debate. I believe this must be one of the cornerstones of our fiscal policy in the 1970s.
My right hon. Friend can take pride in having got this country to a situation in which it is possible to do something about these problems. He has got the economy moving on a path towards export-led growth. Every member of this party is also entitled to take pride in this achievement and in supporting my right hon. Friend's judgment.

Debate adjourned.—[Mr. Ernest G. Perry.]

Debate to be resumed Tomorrow.

BUSINESS OF THE HOUSE

Ordered,
That the Proceedings on the Ways and Means Motion relating to National Health Service Contributions may be entered upon and proceeded with at this day's Sitting at any hour, though opposed.—[Mr. Ernest G. Perry.]

WAYS AND MEANS

NATIONAL HEALTH SERVICE CONTRIBUTIONS

10.0 p.m.

The Financial Secretary to the Treasury (Mr. Dick Taverne): I beg to move,
That the existing weekly rate of National Health Service Contributions payable by employers be increased from 8d. to 1s. 8d. (and the power under the National Insurance Act 1969 s. 8 to provide for decimalisation shall apply to the new rate as it applies to the old).
I propose to address the House very briefly, and my hon. Friend the Minister of State, Department of Health and Social Security, can reply to any queries raised in the debate.
During the debate on the Second Reading of the National Superannuation and Social Insurance Bill, my right hon. Friend the Secretary of State for Social Services announced' the Government's intention to make an interim increase in the rate of employer's National Health Service contribution. The purpose of the Motion now before the House is to provide the foundation for a very short Bill to authorise the increase and to apply the power to provide for decimalisation in the new rate as in the old.
My right hon. Friend said that it was anomalous that the employee's National Health Service contribution was 3s. 2d. per week whilst that of the employer was only 8d. per week. He explained that this anomaly would be ended when the Government's new superannuation scheme came into operation in 1972. The proposed Bill will fulfil my right hon. Friend's intention to act in the interim, before the coming into force of the new superannuation scheme, by raising the employer's present flat rate contribution. It is proposed that the contribution should go up from 8d. per week to Is. 8d. per week, whilst that of the employee, the self-employed and the non-employed will be unchanged.
There is a further justification for an increase in the contribution. The total yield of the contribution as a percentage of National Health Service costs is now lower than it has been since the separate National Health Service contribution was


introduced in 1957. The proposed increase in the employer's contribution is needed not only to moderate the present anomaly and to move towards the new scheme, but to provide some offset to the tendency of the flat rate contribution to fall as a proportion of the total costs of the National Health Service.

10.4 p.m.

Mr. Maurice Macmillan: We shall have ample opportunity for an extended debate in the course of the Second Reading of the proposed Bill. Therefore I shall not delay the House for long. Mainly, I wish to ask a number of questions which I hope the Minister of State will be able to answer when he replies to the debate, because the answers will much improve the chances of our having an informed debate when we come to Second Reading.
I propose mainly to deal with the National Health Service aspects rather than the straight taxation aspects of the Motion. Before coming to them, I must first protest at the way in which this has been handled and at the fact that we are having a considerable increase in taxation outside the Budget proposals. Of course, it is convenient for the Chancellor of the Exchequer to boast that he has not had to raise taxation. But it is a distortion and, even when taken like this in the midst of the Budget debate, it is excluded from the economic as well as the fiscal discussion, and we are forced to consider it more or less in isolation.
This is entirely wrong, because the proposed increase is a tax. It is an increase in taxation which the Government propose to make in the form of a higher employer's flat rate contribution. It is even more of a tax when it becomes part of the so-called wage-related contribution, for then it is calculated as a payroll tax. It is virtually, as part of that contribution, in itself a payroll tax, and will become even more so, when the Chancellor's intention of calculating selective employment tax on a payroll basis is brought into effect.
It is an additional tax on industry and, therefore, on prices. It is collected outside the Budget, and even if it is called a contribution or a levy it is still a tax. Whatever the attractions of this system and whatever the rights and wrongs of this method of getting more money for

the National Health Service, the amount which it is proposed to raise must have been in the Chancellor's longer-term calculations and should therefore have been in his Budget Statement.
Just what will be the effect of this change on costs and prices? I understand that the initial amount is expected to be about £45 million. Perhaps we may have some more details of what this is likely to be in a full year and later on.
Second, what is the purpose of this levy other than that given by the Financial Secretary? Is it to enable charges to be removed in other parts of the Health Service or to make other changes in financing the service possible, or is it simply to produce more money and more resources? I hope that it is intended to use the results of this increase not to make savings in charges or contributions from the Consolidated Fund, but to produce more money for spending on the Health Service. The sum of £45 million is not a very large extra amount—about one per cent., I calculate—but at least it is something—[Interruption.] Well, perhaps the hon. Gentleman will correct me if I am wrong, but that is hardly the question.
Third, is this amount required to make improvements in the Health Service? I do not except the hon. Gentleman to say today what sort of additional expenditure will be possible, but I should like him to consider that for our later debate, and meanwhile to say whether this is required simply to keep the service going at existing standards, or whether it will make improvements possible.
I am not clear about the relative amounts which will be raised by this interim flat rate extra contribution and the ultimate graduated contribution. In reply to a Parliamentary Question, I was told that the proportion now being raised by contribution in 1969–70 is £176 million, out of a total Health Service expenditure of £1,1977 million. That is about 8·8 per cent. In 1970–71, the amount from N.H.S. contributions will be £181 million, out of a total of £2,048 million, or 9 per cent. That is on the present basis. If this proposal raises an extra £45 million. that of course goes up to £226 million, or about 11·3 per cent.
But, on the other hand, I have been informed that the ultimate arrangement


of the graduated contribution—0·6 per cent, from the employer and 0·3 per cent. from the employee—is estimated for the year 1973–74 to raise about £198 million This seems more than the present basis of contributions would raise in that year, but less than one might expect from the increased flat rate contributions. This obviously cannot be so. The Government cannot expect to get less from their ultimate wage-related contributions than they get from the present arrangement. I accept that my figures are not precise, but I trust that the Minister will explain this point.
What percentage of total National Health Service spending is it expected will in future be on the new basis, compared with the present one, and what effect will this have when we ultimately change to the wage-related basis? It would be interesting to know what effect this will have on the contribution from rates, and grants in aid of rates, and whether there is any hope of these decreasing, so helping to offset the extra cost which local authorities, in their capacity as employers of labour, may find themselves paying as a result of this change.
What are the implications of this increase on the principles and methods of financing the N.H.S.? Has there been any fundamental change of Government policy in the major methods of financing the N.H.S.? The Prime Minister made it plain in 1961 that the ultimate object of Labour policy was to bring the N.H.S. and its contributions under the general Exchequer system, so making it entirely dependent on general taxation.
Various Ministers, including the Secretary of State, have given us to understand that this still remains the fundamental objective of Labour policy. I wonder whether it really, is, since in the debate on the National Superannuation and Social Insurance Bill the Secretary of State said:
At present we are facing the oddity that a total contribution of 3s. 10d. flat rate is divided into 8d. from the employers and 3s. 2d. from the employees. I have always found this weighting an indefensible anomaly and I have taken the chance to put it right, since in my view there is every reason why British industry should pay a larger share of what is, after all, a Health Service levy, not a National Insurance Contribution."—[OFFICIAL REPORT, 19th January, 1970; Vol. 794, c. 62.]

It is not British industry but its customers who pay, something that we should always remember.
I assume that the taxation of industry in this way will become a permanent part, and will remain a permanent and increasing part, of N.H.S. finance and that the concept of financing the N.H.S. from general taxation has been abandoned. We can assume, therefore, that any element of insurance that might have remained in the contributions of both employees and employers has been completely given up.
If the idea of a personal contribution of the nature of social insurance has, as the Secretary of State said, been given up and this is now a levy and not a National Insurance contribution, what is the point of continuing the employee's contribution? It has not even the tenuous connection with benefit or use of the graduated pensions contribution. This subsidises the lower-paid workers' contribution to current pensions, but brings a compensating entitlement, one hopes, to a higher pension ultimately. But that is not the sort of thing that is being done here. So why not go entirely to the Exchequer through the Consolidated Fund, if it is to be a levy? Because that is what the Labour Party believes, what is the point of retaining this very small element of personal contribution? It cannot be simply to enable the Chancellor not to have to raise taxation in his Budget. This change, piecemeal as it is, is by reason of the altering of the weighting a change in the system of financing the National Health Service.
I do not propose to delay the House longer, because we can develop the argument at a later stage, but I have asked a number of questions to which I hope the Minister will reply.

10.17 p.m.

Mr. Tim Fortescue: I fully appreciate that we shall have ample opportunity next week to develop this subject in the Second Reading debate on the Bill, but it is only right to point out what is happening because that has been somewhat disguised by the way in which this Motion has been brought forward.
At the moment the employer pays 8d. out of the 3s. 10d. a week, which is approximately 18 per cent. of the total


joint contribution. Under this proposal he will pay another 1s., but the employee's contribution will not be reduced by that 1s., so that the percentage paid by the employer will become about 34 per cent. of the total joint contribution. Under the National Superannuation and Social Insurance Bill now before the House the proposal is that the employer's contribution should be double, in fact more than double, that of the employee. While the employee's contribution will be 0·3 per cent. of his weekly pay up to a maximum of one and a half times the national average earning, the employer's contribution which will be 0·6 per cent. of the weekly pay will be unlimited. It will be a payroll tax, as was finally and somewhat grudgingly admitted by the Minister of State in Committee.
Within a matter of weeks the proportion between the employer's and employee's contributions have been completely and radically altered through the employer's contribution being less than one-fifth of the total, to the proposal that the employer's contribution should be twice and more than twice that of the employee. I thought it only right to put this on record this evening, because if I had not done so it might not have been clear to everyone.

10.19 p.m.

Sir Brandon Rhys Williams: I also wish to say a word on this Motion and particularly on the way in which the Government have brought it into the business of the House. The Minister of State, Health and Social Security, who, I understand, is to reply to this debate, has heard me say more than once when we have been considering reform of the welfare services that we must ask ourselves who is paying what, to whom, and why? He has heard me say that on a number of occasions, but he has never given me any kind of answer. It is a particularly relevant question when we are considering the future of the Health Service of which the finances have got into such a tangle.
Under this Government we are staggering from one expedient to another to make ends meet. They are so busy doing that that they are not thinking of the future and the way in which the evolution of the Health Service is to be paid for. We are entitled to have an inkling of

the Government's thinking. It is not enough that we should try to deduce their thinking from searching in Fabian tracts or by hints in the Press which may or may not be accurate.
I also think that it is an insult to the House to raise taxation by £50 million by inserting an item of three lines and one word between the Budget Resolutions and an Order relating to Sunday Cinemas. This is not the way in which the House should consider a serious increase in taxation.
I am glad that we are to have a debate on this subject shortly. I hope, Mr. Speaker, that I shall have the opportunity of catching your eye on that occasion. Much as I am sure that the Minister of State hopes that I will offer him all the solutions to this knotty problem tonight, I will defer the rest of my remarks for another occasion. However, I hope that, even tonight, the hon. Gentleman will give us some idea of the way in which he thinks that the charges for the Health Service should be balanced as between the taxpayer, the patient, the employer, and the employee.

10.20 p.m.

Mr. Terence L. Higgins: Many years of athletic training, where I suddenly find that the gun goes when I have barely got to my mark, let alone got set, will I hope enable me to cope.
The reason I intervene is that we are gravely concerned at the way the Chancellor clearly has, in making his Budget Statement, done everything he can, when public attention is at its height in Parliamentary affairs, to create a favourable impression in the Budget, we believe by extracting from it matters which at least should be referred to in his speech and by including in his speech some matters which are not normally mentioned by a Chancellor in his Budget Statement.
We are particularly concerned, because in his Budget Statement the Chancellor made this categorical statement:
I therefore propose to introduce a Budget which will in no way, either directly or indirectly, do anything to raise prices."—[OFFICIAL REPORT, 14th April, 1970; Vol. 799, c. 1243.]
Although that may be true in a very strict and narrow sense, because the right hon. Gentleman has arranged that it should be so, it is clear that the Ways and Means Motion we are being asked


to approve is a substantial increase in the costs of industry and is likely, therefore, to be passed on or, alternatively, will result in a fall in industrial investment as a result of Government action. In other words, we believe that this is a measure which will inevitably have an impact on industrial costs and which will result in further inflation. This is a worrying situation at a time when the inflationary spiral is already proceeding at an unprecedented rate.
A number of hon. Members speaking in the debate earlier this evening suggested that it is a wage explosion of an inflationary explosion. The proposals the Government are making in this Motion we believe will increase that tendency. We therefore thought it right on this occasion, although we shall have an opportunity to debate the matter further when the Bill comes before the House, to underline exactly what the Government are doing; because this is indeed a very substantial percentage increase in the burden which industry must bear, an increase from 8d. to 1s. 8d.—more than 100 per cent.
It was therefore right that my hon. Friend the Member for Farnham (Mr. Maurice Macmillan) should have asked exactly what the Government's intention is about this contribution. We do not fully understand why a certain portion of the National Health Service charge should be levied in this way, whereas the vast bulk of it—more than 80 per cent.—comes out of the general Exchequer subvention. We would hope that even at this early stage, as a basis for subsequent debate, the Minister of State will make clear what the Government's thoughts are.
The Financial Secretary distinguished between an insurance contribution and a National Health levy. The insurance element has virtually ceased to exist. This therefore seems to be a rather metaphysical distinction which we believe should be explained by the Government tonight.
The hon. Member for The Hartlepools (Mr. Leadbitter) suggested in the earlier debate, though I should have thought that the point was more in order in this debate, that the Government will go ahead and eliminate prescription charges. Again, I hope that we shall be told

whether the Government have any intentions in that regard.

Mr. Speaker: Order. We cannot go back to that debate, which is now over.

Mr. Higgins: I was not seeking to do that, Mr. Speaker. Rather, I was saying that the point made in the earlier debate was more appropriate to this one. However, we hope that the Minister will make clear tonight whether this is a means of raising additional revenue for the National Health Service which the Government intend to use for the improvement of the service, or whether there is some other thought at the back of their mind.
I shall not detain the House further on this question. We were quite clear that there was a general broad economic technical points regarding the Health Service itself, and we look forward with interest to the Minister's answer.

10.26 p.m.

The Minister of State, Department of Health and Social Security (Mr. David Ennals): I shall attempt to deal with most of the questions put by the hon. Member for Worthing (Mr. Higgins). One or two points have been raised which, I think, would be more appropriate to the Second Reading debate, and we shall not have to wait long for that.
First, I take up the suggestion that this Measure has been deliberately omitted from the Budget. There is no earthly reason why it should have been included. It is not my recollection that, when hon. Members opposite provided for increases, they chose the moment at which to put them in a Budget speech. As long ago as 19th January, my right hon. Friend the Secretary of State announced his intention to bring in the Bill, and I made a statement in the House in which I referred to it, too. We should have debated this resolution before the Budget had not the Opposition, I understand, seen some sinister motive behind the Government's intention and themselves sought to debate it after the Budget instead of before. As I say, I can see no reason why it should have been included in the Budget speech.
The Measure is simple, and I do not think that it should arouse a great deal of controversy. At one stage, I thought that the Opposition would, perhaps, arouse a good deal of controversy and


that we should have a great angry debate tonight, with a vote, but, plainly, they are not as worried as I thought they had indicated they were.
We need this Measure simply because a flat-rate levy, as the National Health Service contribution is, obviously becomes out of date and has to be revised from time to time. When the Conservatives were in office, they introduced no fewer than three Bills to raise the rates. In 1957, 1958 and again in 1961—three times in four years—they raised both the employer's and the employee's rates. Over that period of four years, they raised the employer's rate exactly five-fold and the employee's rate about four-fold. If that rate of increase in contributions had been kept up, we should have been considering tonight an increase of about £1 instead of ls. The employer's contribution has not been raised since 1961, except for the removal of the odd ½d. in 1968, and it, is, therefore, long overdue for revision.
The total cost of the health and welfare services has been increasing year by year. In 1964–65, it amounted to £1,254 million, and in 1969–70 it was £1,973 million, an increase at an average annual rate of 9½ per cent. Even taking into account the effect of pay and prices, there was an increase in real terms of about 4 per cent. a year. This is an increase which we shall expect to sustain. No one can doubt that the demands of the service will create a demand for more funds to be spent. At present, we are facing additional costs of pay awards to nurses and other staff as well as other increases.
If we are to provide a decent service in the 1970s, we must provide increasing resources. In the Government's White Paper, Public Expenditure 1968–69 to 1973–74, one sees the figures of growing expenditure on the Health Service in the coming years.
The question we have to face is how we should finance the Health Service. The hon. Member for Farnham took part in a debate on 1st July last year when my right hon. Friend the Secretary of State explained the breakdown of expenditure on the Health Service. About 85 per cent. is met by taxation, about 5 per cent. by charges and 9½ per cent. by contributions. No new alternatives were

proposed in that debate, and I do not suppose that the Opposition would now prefer to see an additional burden on taxation. It has not been their policy over recent months to demand increases in taxation. If it is their policy I should be interested to hear it, but it seems to be in conflict with what they have said before. Maybe they would prefer increases in charges, but we certainly would not. I take the view of my right hon. Friend, who said on 1st July:
…one can rule out charges as a substantial answer to the problem of finding alternative sources of revenue for the Health Service."—[OFFICIAL REPORT, 1st July, 1969; Vol. 786. c. 262]
This brings us to this method—the National Health Service contribution. The hon. Gentleman said that it was important to have a change from its being an insurance, but it never was an insurance. It always was a levy. It was a levy when it was introduced, continued to be a levy when hon. Members opposite were in power, and is a levy today. The total yield after allowing for the cost of collection in 1969–70 was about £176 million, or 8·9 per cent. of the total cost. This is a lower proportion of the total cost than it has been since 1957, and the proportion would continue to decrease if the contribution were not increased, which is the purpose of the Bill which will be introduced. The increase we propose will raise the yield to about 10·3 per cent. of the cost. This is still a lower proportion than it was for 1958 to 1967, so we are not introducing a dramatic increase.
We propose to put the increase on the employer rather than on the employee because the employee's contribution was increased in 1968, whereas the employer's has not been raised for many years. In any case the division between employer and employee, as my right hon. Friend said in the speech the hon. Gentleman quoted, is quite unreasonable, since it was decided in the new earnings-related scheme, now in Committee, that the employer will pay 0·6 per cent. of the payroll towards the costs of the Health Service and the employee 0·3 per cent. Therefore, the employer in future will be paying twice as much as the employee. We thought that that was a proper division, and that it would be sensible to move towards that, although we are going only part way towards it.
The increase of 1s., making 1s. 8d. in all, is quite moderate. Bearing in mind that the rate has stood for nine years, apart from rounding the halfpenny, during which the cost of the Service has more than doubled, we are not making an undue increase on employers. They will still be paying only about half the contribution of employees. In most of the countries of the Common Market and other countries in Europe, a higher proportion is normally paid by the employers than the employees, so it is a reasonable and sensible procedure that we are taking.
The hon. Gentleman asked about prices and seemed to think that the proposal would add about 1 per cent. to the cost of living—

Mr. Maurice Macmillan: I was referring to the extra resources it brings into the Health Service. I misread my notes, and the 1 per cent. should be 2·5 per cent.

Mr. Ennals: I am sorry that I misunderstood the hon. Gentleman. I thought that he was referring to prices.
He did also ask about the effect on prices, and this would be modest. Our estimate is that it would not make a difference of more than one-tenth of 1 per cent. in the Index of Retail Prices. That is if the whole cost were passed on by the employer, so it is a very marginal figure.
The proposal would increase the yield of the contribution by about £53 million in a full year. It is necessary to take this step in order to have the funds and resources to develop the service. We cannot finance the service in the seventies with the contribution rate of the sixties.

The increase of 1s. in the employers' rate is fully justified.
I accordingly ask the House to accept the Motion which will authorise the introduction of the necessary Bill.

Question put and agreed to.

Resolved,
That the existing weekly rate of National Health Service Contributions payable by employers be increased from 8d. to 1s. 8d. (and the power under the National Insurance Act 1969 s. 8 to provide for decimalisation shall apply to the new rate as it applies to the old).

Bill ordered to be brought in upon the said Resolution by the Chairman of Ways and Means, Mr. Crossman, Mr. Ross, Mr. George Thomas, Mr. Taverne, Mr. Ennals and Mr. Dell.

NATIONAL HEALTH SERVICE CONTRIBUTIONS

Bill to increase contributions payable by employers under the National Health Service Contributions Act 1965, presented accordingly, and read the First time; to be read a Second time Tomorrow and to be printed. [Bill 145.]

SUNDAY CINEMATOGRAPH ENTERTAINMENTS

Resolved,
That the Order made by the Secretary of State for the Home Department, extending Section 1 of the Sunday Entertainments Act 1932 to the Borough of Ilkeston, a copy of which Order was laid before this House on 19th March. be approved.—[Mr. Merlyn Rees.]

AIR SAFETY

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ioan L. Evans.]

10.37 p.m.

Mr. Edwin Brooks: Last November my hon. Friend the Member for Nuneaton (Mr. Leslie Huckfield)—whom I am glad to see here—initiated an Adjournment debate on the subject of near collisions between aircraft. I do not seek to inflict upon the House a Second Reading, as it were, of his excellent speech on that theme, although the scale of the dangers he mentioned would normally merit repetition and hammering home.
Instead, I wish to deal with the general question of air safety, at a time when our finite airspace is becoming jammed with literally soaring traffic flows. Only last Thursday, within minutes of hearing of this forthcoming debate, I was reading the Press headlines which told of the Wolverhampton crash, and that accident reminds us that citizens asleep in their beds, no less than passengers, lie under the shadow of violent death from the sky.
On 5th February there was a reported near-miss over Wirral, where my constituency lies, when the Aer Lingus 737 Sierra Echo narrowly avoided a twinengined light aircraft flying at the same height and only seconds away. With larger and faster passenger aircraft coming into operation, the risk of major disaster due to a crash or a collision is mounting. The dreadful accident at Stockport in June, 1967, is still fresh in our memories, particularly in the North-West, but the tragedy would have been even more horrifying had the big Canadair C4 crashed upon crowded homes and streets.
Accidents and death are not peculiar risks of air transport, as any motorist or pedestrian knows, but any complacency is unjustified, on at least two scores.
First, the air accident statistics, particularly of fatalities, are far less comforting when calculated in terms of journey times rather than mileage. Secondly, the passenger involved in an

air crash is rather more likely than the motorist to find that his first crash will prove to be his last.
Increases in speed or size usually involve increases in complexity, and despite the sophisticated fail-safe mechanisms of the modern airliner, the margins of safety are in the last analysis critically dependent upon the human factor. Simply jacking up the technology and calling in the computers will still leave human beings ultimately responsible for handling crises and emergencies on a supersonic airliner, say, travelling at half a mile a second. This proposition is surely indisputable, tonight of all nights, as brave men struggle heroically to return from the lonely far side of the moon.
The increasing size of aircraft also presents a new dimension of danger. Deficiencies in airworthiness, or pilot error on a Boeing Jumbo 747, could kill the equivalent of the crowded population of this House on Budget Day, not to mention the thousands of people lying beneath the flight path. These dangers are obviously accentuated by the risk of collision, and I should be glad if my right hon. Friend would give us an up-to-date report on the progress being made with Mediator, over which some serious reservations were expressed this week by B.A.L.P.A. I should also appreciate his comments on the growing American interest in precision area coverage systems, since the need to maximise use of controlled air space by converting the corridors into effective dual carriageways is becoming daily more urgent.
Nevertheless, even if collision risk was eliminated, planes would still crash, as at Stockport and again at Perpignan, where one of my young constituents tragically lost her life. Since many, if not most, of such crashes tend to occur upon landing or take-off, I should be grateful for information about recent advances which I understand Britain has pioneered on runway surfaces and braking systems. Certainly there can be no room for complacency in improving landing and take off procedures, since it took the crash of the Afghan 727 in January, 1969, to precipitate the regulations which at last came into force last September and which require foreign airliners to observe the same landing rules as do British pilots.
On this same point, I should appreciate further clarification of the height controls upon aircraft crossing my constituency bound to and from Speke Airport, Liverpool. My right hon. Friend informed me on 25th March that
no specific minimum heights are required in the case of aircraft flying over Bebington…in accordance with normal aviation practice; no unusual risk exists in the borough in so far as such operations are concerned and it is not proposed to introduce any special restrictions."—[OFFICIAL REPORT, 25th March, 1970; Vol. 798, c. 1431.]
Yet my right hon. Friend's predecessor had earlier informed me that planes passing over Higher Bebington could be expected to be no lower than 1,200 feet at that stage of their glide path, and I am somewhat disconcerted to find that apparently they can fly at roof top level without infringing any regulations.
Furthermore, what would be defined as an "unusual risk"? Has any town in the country installations which, unlike Bebington, do involve unusual risk and require special safeguards? Since the western and southern shore of the Mersey estuary is festooned with oil refineries, storage tanks filled with high volatile products, power stations with chimneys, and numerous industries such as ship building and Unilever's huge complex, I should have thought this was an area in which roof-skipping aircraft should be discouraged by law. I could not help noting the comments of some of those in the vicinity of last week's crash in the Midlands, to the effect that they had been expecting this crash for some time, and without wishing to sound unnecessarily alarmist, I hope my right hon. Friend will say something tonight to reassure those—not only in my constituency—who have been disturbed at the apparent implications of his answer last month.
I have already mentioned the Stockport and Perpignan crashes, and the House will recall that subsequently a Special Review was ordered of the safety performance of United Kingdom airline operators. The Edwards Report also examined the safety problem, linked as it is to the financial strength, size and resources of the operator, and the Government have now proposed certain structural changes involving the Air Registration Board, the A.T.L.B. and the air traffic control services. Since January

this year, there have been rumbles of discontent from B.A.L.P.A. and others about the merging of safety and economic considerations under a common controlling body, and I should like to hear the latest Government thinking on this vital organisational principle. There is surely a strong case for an independent and financially separate air safety authority, particularly when one appreciates the risks which arise when aircraft and tour operators with inadequate resources try to compete in the air transport industry. There are powerful lobbies in this industry, and it would be dangerous for any new safety regulations to be jeopardised by the special pleading of those claiming financial hardship.
This is particularly important when we recall the findings of the Special Review about the safety performance of B.E.A. and B.O.A.C. on the one hand, and the private operators on the other. It may sound harsh, but those statistics of significantly higher accident rates among the independent airlines surely prove that in commercial aviation there is no room for misplaced sentiment about the small man. My right hon. Friend is perfectly well aware of the lobbies which seek to disguise this fact, and I hope he will not pander to the latest flurry of silly talk about creeping nationalisation.

Mr. F. V. Corfield: To be fair, I think that the hon. Gentleman will agree that the figures for B.U.A. do not tally with the overall condemnation of the independent sector.

Mr. Brooks: The figures in the special review straddled all independent operators and showed significantly, a two to one ratio of accidents, in their disfavour compared with B.E.A. and B.O.A.C. The fact is that if we want to survive in an age of vastly increasing air transport, the two State airlines should be given every encouragement. As the special review showed, this is not ideology, but a stark fact.
I have mentioned B.A.L.P.A. on two occasions already, and it is right that we should listen carefully to the pilots whose own lives, as well as those of their passengers, depend upon effective safety procedures. But I wish to broach a subject on which I detect a certain coyness in our public discussions of aviation danger: the rôle of the pilot and the aircrew generally.
In an interesting Appendix M to the Special Review published in May, 1968, certain suggestions were made based on the evidence that 60 per cent. of notified accidents were attributable to pilot error, compared to only 30 per cent. attributable to deficiencies in airworthiness. The author, Captain Taylor, who was one of the independent advisers to the review, demanded a frontal attack upon this problem, and asked for much greater medical and scientific research into the underlying reasons for pilot error.
This is obviously sensible, particularly at a time when public opinion is beginning to grasp the frequently decisive rôle of the human being in road accidents. The airline pilot on today's increasingly congested airways is facing more complex pressures than the family motorist, and it would be foolish to underestimate the psychological tensions and perceptual difficulties he endures. These pressures were succinctly illustrated in an article in The Guardian on 4th February by an experienced international airline pilot. He described how the strictly professional vocabulary of aeronautical radio-telephony might be supplemented by a verbal dog-fight should the radar controller order a reduction in speed at the very moment when the plane is caught in the turbulence of a thunderstorm and requires to maintain a high speed for aero-dynamic reasons.
Again, in The Times on 7th March, Walter Tye stated baldly:
We know least of all about man—in this case, pilots and crew. This is not altogether surprising because what we need to know is not only how man usually behaves but how he will act occasionally, possibly in very unusual circumstances.
I appreciate of course that the trained airline pilot of today is not likely to be someone who wilts under stress; I accept that the operators subject their pilots and crew to stringent tests, not only into their technical competence. But nevertheless, with the bulk of accidents apparently arising from so-called pilot error, it is commonsense to see how far the cockpit workload can be simplified to let the pilot sit and stare, as it were, during the collision-critical stage of flight—notably during arrival in the milling congestion of the terminal areas. As the author of The Guardian article put it:

a pilot with hands flashing madly round the cockpit adjusting things is already overloaded. If something goes wrong panic may follow.
And sometimes things do indeed happen as crowded airliners come into terminal areas for stacking or landing. Not least, there is the risk of light private aircraft getting tangled up with them, and this brings me to one of the major anxieties I have tonight. It is part of the general problem of mix between traffics, a problem which we solved in the case of the railways by a clear segregation of track, and in the case of the roads by a far less satisfactory, and now desperately belated effort to separate by lane markings, crash barriers, raised footpaths and so on.
In the case of air traffic, the problem is similar in kind, but immensely complicated by the three dimensional nature of the medium. Military traffics, ranging from supersonic fighters to troop transports, are mixed with civil traffics which range from the Dakota to the Jumbo, and soon to the Concorde perhaps, and from the huge jet with its forecast problems of turbulent wake to the glider which rides the thermals. Mixed up with all this variegated traffic, subject to various and different air traffic control systems and devices, is the private light aircraft traffic. Its scale is considerable, and as a recent controversy at Luton made clear, we shall hear much more of the difficulty of combining public transport aircraft with private light aircraft bent on business or pleasure.
On Monday my right hon. Friend gave me some details of this traffic. There are today 1,232 aircraft of an all-up weight of 6,000 lb. and below registered by the Board of Trade in the name of private individuals in Great Britain, and in addition some 342 privately-owned gliders registered with the British Gliding Association. The total number of landings by such aircraft are not known, but I was told that for the airports at which almost all the commercial flying takes place there were roughly a quarter of a million landings in 1969 of aircraft on private, aero-club and local pleasure flights.
This traffic is separated both vertically and laterally from the public transport aircraft, which operate, of course, as my right hon. Friend explained:
mainly along the airways and in other controlled airspace in which aircraft are only


allowed if they are suitably equipped and their pilots suitably licensed.
Yet when Sierra Echo came near to collision with an Aero Commander over Wirral two months ago, there was certainly—according to The Times report—no vertical separation, and precious little lateral separation. Clearly, something had gone wrong, and there are repeated allegations from both the United States and here that the extent of such near misses are substantially underestimated.
I know that my right hon. Friend discounted such allegations on 25th November in response to a specific intervention from my hon. Friend the Member for Nuneaton (Mr. Leslie Huckfield). But with respect, it is clearly stated in paragraph 79 of the Special Review that
…there is at present no need for information on aircraft 'incidents' to be notified to the Department. This means that many events that may affect the safety of an aircraft are not reported and accordingly no remedial action can be taken.
The review went on to recommend that
the Board of Trade and the Air Registration Board should require that all occurrences that could endanger aircraft should be brought to light and used by operators for accident prevention purposes.
This applies to all incidents, and not simply near-misses, and I should be glad to know tonight whether the Government have any proposals to encourage such information to come forward. Obviously, operators are unlikely to wish to report incidents which might reflect adversely on their competence—and, possibly, most unfairly so—and I can see the case for ensuring confidentiality. Nevertheless, I should have thought that where air traffic controllers themselves identify such near-misses—and presumably this will become easier once secondary radar coverage is generally available—there should be a severe penalty imposed upon those who have infringed controlled airspace and, moreover, have not reported any possible hazards.
On 25th March, an article by James Stuart appeared in the Evening Standard which reiterated the extent of the risk. He alleged it to be between three and five times greater than official estimates as far as the South-East was concerned, and he made one particular grave allegation upon which, I feel, my right hon. Friend should comment. He said:
A light aircraft could flip across the path of an airliner—even a Jumbo Jet—without any-

one knowing it was there. In the free zones, so called, around the airports, in what are called visual flight rules, a private aircraft can fly up to 5,000 ft. These areas include the "stacks" where airliners are held to wait their turn for landing at Watford, Epsom (for Heathrow) and Mayfield (for Gatwick). And usually over these free zones airliners taking off from either Heathrow or Gatwick are normally "held" to 3,000 to 4,000 ft.
I feel that that statement, together with the rest of that article, needs to be taken seriously, particularly if it is to be the case, as Mr. Stuart also states, that by 1980 the British Light Aviation Centre has estimated that there will be about 60,000 private pilots in this country. As an article in The Guardian pointed out on 15th November last, only two months earlier, in the U.S.A., 83 passengers had been killed when their DC9 was speared in mid-air by a small private plane, and the moral for Britain needs no further emphasis on my part.
The present anxiety over Mediator seems linked to the fear by the pilot that he is being left to the mercy of the radar controller, whose gadgets are in the last resort vulnerable to indiscipline in the airways. Most private pilots are likely to be careful, since their own lives are at stake—although the same argument might apply to car drivers, but clearly does not. Yet the minority, lacking the sophisticated electronic equipment of a VC10 or a 747, could, either through foolishness or inadvertence, cause disasters to these giant planes and havoc to people down below in London or elsewhere.
Last August, The Times in an editorial called for a full-scale inquiry into the uses of Britain's airspace
so that both heavy and light aviation can live together happily—and in safety".
I urge the Government to consider some such inquiry, particularly at a moment when the third London Airport will throw a further huge variable into the present traditional mix of traffics.
The subject of air safety is so immense that I must resist the temptation not to conclude this debate. My main concern tonight is with pilot error, with the mix of traffics, with the future organisation of air safety in the light of Edwards and with the introduction of the Mediator automated air traffic control which, we are promised, will become operational during the 1970s. This is more than


enough to seek my right hon. Friend's comments upon, but before sitting down I would ask him whether the Government have any further thoughts on piracy and bomb risks. In particular, may we expect further checks on passengers and their luggage proceeding through British airports, both on a routine basis and by means of spot checks?
For example, can we anticipate regular checks by metal detectors capable of identifying bombs, guns and, for that matter, swords? I realise that this is too vast a problem to be dealt with satisfactorily in such a debate as this, but in view of the spate of recent incidents, which could so easily jeopardise lives, and even the continued rate of growth of civil air transport, I think that massive research into this type of problem—and there is no point in stinting expenditure when we consider that a single armed gunman firing wildly in a Concorde at 60,000 ft. could cost £10 million of aircraft alone—would be well justified, not least as a deterrent to the maniacs who sometimes board the aircraft in which we fly.

10.55 p.m.

Mr. Leslie Huckfield: May I first congratulate my hon. Friend the Member for Bebington (Mr. Brooks) for raising yet again this important subject, and for the excellent way in which he has put forward many detailed points. I ask my right hon. Friend if he will give some definite and further information on one point. I have for a long time now raised various matters concerning air safety in this House, on the Adjournment debate which my hon. Friend has already mentioned, in numerous Parliamentary Questions and on other occasions. On most of the questions I have raised I have been told that answers will be given once Linesman/Mediator, which is a new computer-based system of air traffic control, becomes operable. This week serious doubts have been expressed by the British Airline Pilots' Association about the efficacy of Linesman/Mediator. Will my right hon. Friend tell us what phase Linesman/Mediator has reached, what is the difficulty which means that we have to slip back to phase three-quarters, and what exactly will Linesman/Mediator do when it becomes operable?

10.56 p.m.

The Minister of State, Board of Trade (Mr. Goronwy Roberts): My hon. Friend the Member for Bebington (Mr. Brooks) has, with the eloquence and precision which the House has come to expect of him, raised the matter of air safety, the importance of which can hardly be exaggerated. We are all in emphatic agreement with him when he warns against complacency and undue alarmism. I am glad to have this opportunity of assuring the House once more that my Department constantly and urgently examines how to improve even further the safeguards we now have against accidents in the air. My hon. Friend raised a large number of points, which I shall do my best to deal with in the limited time left to me.
He rightly and effectively raised two matters of immediate interest to his constituents in Bebington. He will recall that I informed the House of the circumstances of the air miss over Wallasey on 5th February on the following day. I am glad to be able to tell him tonight that the official investigations have been completed. A report has been prepared and will be considered by the Air Miss Working Group at its next meeting which takes place tomorrow. I can assure the House that such remedial action as may be necessary will certainly be taken, having regard to the recommendations which may be made by the Air Miss Working Group.
My hon. Friend also asked for clarification of the rules governing the flight of aircraft to and from Speke airport, which directly affect his constituency. He asked in particular for clarification of the reply I gave to his Question on 25th March. I shall take a minute or two to spell out what the rules are for him and for the record, which I know he will wish to consult and discuss with his constituents.
The law concerning low flying is contained in Rule 5 of the Rules of the Air and Air Traffic Control Regulations, 1969. This states that an aircraft other than a helicopter shall not fly over any congested area of a city, town or settlement below:

(i)such height as would enable the aircraft to alight clear of the area and without danger to persons or property on the surface, in the event of failure of a power unit, or


(ii)a height of 1,500 ft. above the highest fixed object within 2,000 ft. of the aircraft

whichever is the higher.
However, the rules specifically exclude taking-off, landing or practising approaches to landing.
The misunderstanding that has arisen on the answer which I gave in the House may be because of an unintentional omission by my hon. Friend of an extremely important phrase in the middle of the first sentence of my answer. If I may quote myself—and on re-examination I find that I said precisely what I ought to have said—
No specific minimum heights are required in the case of aircraft flying over Bebington in the course of landing or practising approaches to landing at Speke…".—[OFFICIAL REPORT, 25th March, 1970; Vol. 798, c. 1431.]
It is not a statement that no specific minimum heights are required, full stop. It is a statement that no specific minimum heights are required in the circumstances stated. Indeed, it is clear that minimum height restrictions are somewhat impracticable when making approaches to land or practising landing or taking off. However, it is right I should draw attention to Article 40 of the Air Navigation Order, 1966, which applies in these circumstances as well as more generally. This article states that a person shall not wilfully or negligently cause or permit an aircraft to endanger any person or property. There is no record of any infringement of this article having been committed in the Bebington area.
Equally, I am well aware, from the representations made to me personally and in the House by my hon. Friend on behalf of his constituents, that there is concern in Bebington and no doubt in adjacent areas. Not many representations from local residents have reached me personally. This is not to say that we are immune to any apprehensions or anxieties which beset people who live close to airports such as Speke.
Perhaps I can help by informing my hon. Friend and his constituents that the flying training conversion programme, which has been carried out by Cambrian airways on BAC 1–11 aircraft and which probably have caused disturbance—mainly noise—should be completed by the first week in May. He may wish to convey that information to his con-

stituents in the appropriate way. I would also add that a letter addressed to me, with a copy to him, by a young lady who rejoices in the name of Miss Roberts is being very carefully considered in my Department. She raises a number of very reasonable points relating to the position in Bebington.
I turn from local questions which my hon. Friend rightly raised to one or two of the larger issues to which he referred. I refer in particular to the question of research into the underlying reasons for pilot error. While this particular matter was not made the subject of a recommendation by the Special Review, the need for more precise knowledge about the job of the airline pilot and in particular the circumstances in which he is likely to make serious errors is accepted.
As Captain Taylor said in the appendix to the Special Review
…only by a deeper understanding of the complex forces at work in regard to the pilot in his particular environment can we hope to make real progress towards a solution of the 'pilot error' accident phenomenon.
There is no quick or simple solution to the problem. We are tackling it now so far as is possible in the short term, and at the same time we are exploring with the Ministry of Technology what can be done in the long term. I have more detail here, but I see that time is speeding by. I fear I have no time to embroider what I have said beyond that we are fully seized of the importance of the point.
My hon. Friend also voiced reservations about the Government's proposal to make safety regulation part of an integrated body also dealing with economic regulations of the industry rather than retain a separate body. I do not think the House would expect me to comment extensively on this point, as the preparation of legislation is proceeding. But I would invite my hon. Friend, for whom I have very great respect as one who is not bound by any preconceived dogma in these matters, to consider whether safety standards necessarily are put at risk. An integrated authority, combining the resources and information on various aspects of the airline industry, can pull knowledge together and in that way increase the chances of a more coherent and effective safety policy. I put it to


my hon. Friend, because I know that his mind is not closed.
He and my hon. Friend the Member for Nuneaton (Mr. Leslie Huckfield) asked about Mediator. Here again, I must truncate my remarks. We expect the first stage of Mediator to be introduced in the spring of next year. I am somewhat puzzled by the doubts expressed by B.A.L.P.A. and some people in air traffic control B.A.L.P.A. has certainly been kept informed. I know of no reason for the assertions which the Association is reported to have made.
A.T.C. personnel are fully informed of the progress of Mediator. Indeed, the system has been designed largely by air traffic controllers and has been developed as a result of trials at the evaluation unit at Hurn, in which practising controllers have taken part.
It is wrong to suggest, as has been suggested, that Mediator is based on obsolete military radar. Mediator is based mainly on civil radar, and some military radar provides a valuable increase to its coverage.
Area navigation facilities were—inevitably—mentioned. Given the presence of my hon. Friend the Member for Nuneaton, there is a guarantee that this point would be raised—

The Question having been proposed after Ten o'clock, and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at seven minutes past Eleven o'clock.